Preamble

The House met at half-past Two o'clock

PRAYERS

[MR. SPEAKER in the Chair]

Oral Answers to Questions — NATIONAL FINANCE

Taxpayers (Statistics)

Mr. Greenway: asked the Chancellor of the Exchequer how many people have been taken out of taxation since May 1979; and if he will make a statement.

The Minister of State, Treasury (Mr. Peter Brooke): Some 1·4 million people would still be paying tax today had we simply increased the 1978–79 tax allowances in line with inflation; they now pay no income tax at all.

Mr. Greenway: I congratulate the Government on this excellent fact. Will my hon. Friend confirm that the Government aim to take more people out of taxation? Should this not be contrasted with the numbers who would be taken into taxation if public expenditure were increased by £28 billion, forcing the standard rate of income tax up to 53p in the pound, which is what the Labour party proposes if ever it wins power again?

Mr. Brooke: It would he wrong for me to anticipate my right hon. Friend the Chancellor, but it would be in the spirit of what he has achieved so far if more people were taken out of income tax. As to the increase in public expenditure of £28 billion, it has been said by the Labour party that it would only tax the top 5 per cent. It has also been said, out of Sheffield, that to say that Labour would tax only the top 5 per cent. would be dishonest.

Mr. Willie W. Hamilton: Is it not the case that since the Government came into office in 1979 the total tax burden hs increased from 38 per cent. of GNP to 44 per cent. now, and that a recent report of the OECD showed that our tax burden is now heavier than that of most industrial countries in the West?

Mr. Brooke: The hon. Gentleman is correct to say that taxation as a percentage of GNP has increased, but that is why the Government intend to reduce it.

Mr. Brandon-Bravo: In this debate, should we not also consider the impact of personal allowances? Am I not right in saying that while our personal allowances are similar to those of our major competitors, our basic rate of tax is higher?

Mr. Brooke: My hon. Friend is correct. My right hon. Friend the Chancellor has shown a balance between real increases in allowances with cuts in the basic rate of income tax.

Mr. Donald Stewart: Does the Minister accept that in evidence it is necessary to tell not only the truth but the

whole truth, and while we may take some satisfaction in the numbers that are being taken out of income tax, that cannot be dealt with in isolation? Which Government put a standard rate of 15 per cent. VAT on the vast majority of goods and services?

Mr. Brooke: It is true that, in line with the policy of moving the burden of taxation from direct to indirect, the previous Conservative Administration discharged that task.

Take-home Pay

Dr. Michael Clark: asked the Chancellor of the Exchequer if he will indicate the increase in take-home pay since 1979 of a married man with two children on the average industrial wage; and how it compares with the national increase in productivity over the same period.

Mr. Brooke: The real take-home pay of a married man who has two children and is on average earnings is expected to increase by 17 per cent. between 1978–79 and 1986–87. Since this Government took office productivity has increased by 13·4 per cent.

Dr. Clark: Does my hon. Friend agree that those figures show that, during the Conservative Government's period in office, there has been a substantial increase in the standard of living of people in this country? Does he also agree that unless we modify our pay demands, or increase our productivity, our international competitiveness is at risk?

Mr. Brooke: I agree with the first part my hon. Friend's question. As to the second part, what is already an outstandingly healthy economy would he healthier still if the rise in real earnings were matched by a rise in productivity, impressive though the latter is.

Mr. Terry Fields: Is the hon. Gentleman aware that in parts of Liverpool 80 per cent. of children attending school receive free school meals, which is indicative of low pay in that area? On average, 50 per cent. of school children in my constituency of Broadgreen receive free school meals. Is it not a ludicrous and idiotic suggestion by the Chancellor of the Exchequer that people in places such as Liverpool should take more modest settlements in their income? Is that not an absolute recipe for disaster for an already impoverished region? When will the Government do something positive about providing real jobs and a decent standard of living for people in Liverpool?

Mr. Brooke: Under present circumstances, if we could achieve a 1 per cent. reduction in the rate of growth of real pay, that would, over time, create 110,000 to 220,000 new jobs. Those figures can be increased pari passu. That would make a powerful contribution to our unemployment problems.

Tax Yield

Mr. Patrick Thompson: asked the Chancellor of the Exchequer if he will estimate the total tax yield from those earning more than £25,000 per annum in (a) 1978–79 and (b) 1985–86.

The Chief Secretary to the Treasury (Mr. John MacGregor): Taxpayers with incomes of more than £25,000 paid £8·7 billion in income tax in 1985–86, which was 22·8 per cent. of the total. These taxpayers represent


just under 4 per cent. of all income tax payers. The same top percentage of taxpayers in 1978–79 paid £7·8 billion in income tax at 1985–86 prices, which was 20·6 per cent. of the total.

Mr. Thompson: I thank my right hon. Friend for his reply. Does he agree that that destroys the credibility of Labour's plans for raising extra revenue? Does he accept that the result of a Labour Government would be a renewed flight of talent from this country and high tax on the low earner?

Mr. MacGregor: My hon. Friend is quite right. The figures I gave show that the yields have increased, with lower taxes on the higher paid. They show what we have always said, that getting taxes down from the penal rate levels under the last Government motivates the wealth creators, to the benefit of the whole country, and increases yields. Labour's policy of a return to the rates of tax that existed in 1979 would, as my hon. Frind said, drive many of our most able, energetic and ambitious people out of the country.

Mr. Ashton: Are not the statistics in this planted question so obviously fiddled? Surely, if an extra 3 million people are taken out of taxation by being put on the dole, it affects the bottom of the pyramid and makes it look better at the top.

Mr. MacGregor: I was talking about a percentage of the total tax. I should like to make it clear to the hon. Gentleman that the figures are not fiddled. They are accurate figures and they demonstrate that a higher proportion of the taxes currently obtained—it is not a question of people at the bottom end coming out —comes from those with higher earnings, because of the motivations we have introduced.

Mr. Nicholls: As increasing tax rates on the rich actually produces less revenue and not more, does that not mean that if Labour were to impose such tax bands the £24 billion that it has to raise for its social spending would have to be raised entirely from those paying the standard rate income tax?

Mr. MacGregor: It is true that under a Labour Government —if ever there was one again—tax would rise on all income groups. My hon. Friend does not need to go as far as that. Labour's plan to raise £3·6 billion from the top 5 per cent. would mean tax rates of 70 per cent. for all those—including married couples with both partners earning—with earnings above £24,000. That is clearly a crippling increase in the tax burden on those groups. I believe that it would reduce yields, but it would have much more serious effects on the economy as a whole.

Mr. Watts: Does my hon. Friend agree that priority should now be given to reducing further the standard rate of tax, which is the marginal rate for most taxpayers? As cuts in the top rates of tax have increased revenue, is it not possible that there would be a similar effect if the standard rate were cut?

Mr. MacGregor: I am sure that my hon. Friend noted that in his Budget this year my right hon. Friend the Chancellor of the Exchequer deliberately skewed the tax reductions—this was with emphasis on the basic rate—in favour of those with average to lower incomes. It is precisely that group, which we believe is still taxed too highly, which will gain most from the Chancellor's longterm pledge on income tax.

Mr. Gould: Is my hon. Friend the Member for Bassetlaw (Mr. Ashton) not right when he says that the figures produced by the Chief Secretary are suspect because the percentages that he quotes are those of a much narrower tax base, a base which has been made narrower by the unemployment which the Government's economic policies have produced?

Mr. MacGregor: The absolute amount of tax increased from this group for the two years at 1985–86 prices, and not proportionately. That is why lower taxes, which motivate people, have in this instance produced a higher yield.

Mr. Wrigglesworth: If the Government believe in lower taxes, why in the long period of seven years that they have been in office have they increased taxes for the average taxpayer by 3p in the pound?

Mr. MacGregor: If income tax had remained at the same rates and allowances as in 1978–79, an additional £8 billion would have come through from income tax in this period. That is a sign of how we have been following our policy of reducing direct taxes.

Wider Share Ownership

Mr. Forman: asked the Chancellor of the Exchequer if he will make a statement on Government policy towards the fiscal encouragement of wider share ownership.

Mr. Brooke: Over the past seven years the Government have significantly improved and extended the tax reliefs available for participation in company share schemes. The number of all-employee share schemes has increased considerably, from 30 in 1979 to over 1,150 today.

Mr. Forman: Is my hon. Friend aware that these figures are very welcome, but that the time has come when the Government need to go further in this direction? Does he accept the powerful case that is being advanced by people in all parties, I believe, that employee share schemes that are available to all employees should have some measure of time-limited tax relief? Will he draw this important point to the attention of our right hon. Friend the Chancellor of the Exchequer when he is considering his next Budget?

Mr. Brooke: I welcome my hon. Friend's remarks. Further relief will be kept under review in the manner in which it steadily has been over the past seven years. A great deal has already been achieved, but I shall draw my hon. Friend's words to the attention of our right hon. Friend the Chancellor of the Exchequer.

Mr. John Mark Taylor: Will my hon. Friend accept from those of us who do not have any family silver how pleased we are with the performance of our Jaguar, Telecom, TSB, Cable and Wireless, British Aerospace and other shares?

Mr. Brooke: I am grateful to my hon. Friend for his comment. He may be interested to know that of the companies which have been privatised, 350,000 employees, or 80 per cent. of the employees therein, have become shareholders.

Married Man's Allowance

Mr. Barron: asked the Chancellor of the Exchequer how many representations he has received on the Government's proposals to abolish the married man's allowance.

Mr. MacGregor: We have received a considerable number of representations on the Green Paper. The great majority of those expressing a preference support the proposal to introduce transferable allowances; which is what the Government are recommending and is not the same thing as abolishing the married man's allowance.

Mr. Barron: If the estimated cost of the proposals in the Green Paper will not be a cost to the Exchequer, are they not likely to impose a further tax burden on over 6 million tax payers, bearing in mind that if the cost were to fall on the Exchequer it would be as high as £5·4 billion? Why does the Minister not open to discussion the cost of this proposed scheme, when at the end of the day it will not do justice to the married woman's allowance anyway?

Mr. MacGregor: It is intended that the scheme will be introduced over a period, and much depends on what happens to thresholds and allowances during that period. I believe, as is clear from the responses to the proposals in the Green Paper, that there are so many benefits in moving to transferable allowances that it is a tax reform that the vast majority of taxpayers would support.

Mr. Marlow: Why does my right hon. Friend not take action to take the money from the married man's allowance and use it to encourage mothers to stay at home and look after their children? Will he, with one move, open up jobs in the labour market for men who cannot find work and at the same time encourage a lot of mothers to do that which they do best — stay at home and look after their children?

Mr. MacGregor: The proposal will give choice to married couples. It will give benefits to wives who are having their first children, who perhaps have worked before and who stay at home to look after their children. They will be able to transfer the allowance to their husbands. The proposal we recommend helps couples at the stage in their lives at which suddenly one partner becomes financially dependent on the other. The crucial factor is that it gives them a choice.

European Monetary System

Mr. Maclennan: asked the Chancellor of the Exchequer what recent discussions he has had with the President of the Bundesbank concerning sterling's relationship with the exchange rate mechanism of the European monetary system.

The Chancellor of the Exchequer (Mr. Nigel Lawson): I have discussed the European monetary system with the president of the Bundesbank on a number of occasions.

Mr. Maclennan: Does the Chancellor of the Exchequer accept that if his import-inducing consumer boom continues to rip sterling may again come under pressure? In that eventuality, would it not be better for the Chancellor to cover himself within the exchange rate mechanism than to rely on the uncertain bounty of the Bundesbank?

Mr. Lawson: There is much to be said for fully joining the European monetary system. One of the reasons for joining the system is not the soft option which the hon. Gentleman implied. It would not be a soft option.

Mr. Dykes: If France and Germany are in the EMS as larger and stronger economies, why cannot we join it?

Mr. Lawson: France and Germany do many things which we do not necessarily do, as much as I respect the Republic of France and the Federal Republic of Germany. My hon. Friend's support for our membership of the European exchange rate mechanism is well-known and consistent. We keep this matter regularly under review. The balance of argument has shifted considerably, but the Government have not yet decided that the time is tight.

Mr. Robert Sheldon: As everybody knows of the differences of opinion between the Chancellor of the Exchequer and the Prime Minister about joining the monetary exchange rate mechanism, will the Chancellor accept that in this instance, perhaps uniquely, the Prime Minister may be right, and that if we were to join, despite the obvious advantages of a fixed currency, we would be closely tied to the German deutschmark, with the problems that that would entail?

Mr. Lawson: The right hon. Gentleman is extremely percipient in noting that if we were to join the EMS fully sterling would be linked to the deutschmark.

Mr. Maples: When my right hon. Friend the Chancellor next discusses the EMS with the president of the Bundesbank, will he discuss whether there might be some connection between the fact that bank lending in Germany is growing at only about 5 per cent. a year and their interest rates are under 5 per cent., whereas here bank lending is growing at about 16 per cent. and our interest rates are 11 per cent.?

Mr. Lawson: There are many reasons why German interest rates are lower than those in this country. One is that inflation is even lower in Germany — indeed, at present it is negative — than in this country. Another reason, and it is one to which I have alluded on a number of occasions because it is important, is that the markets can see that unit labour costs in this country are rising a good deal faster than in Germany and most of our major competitors.

Dr. McDonald: Will the Chancellor confirm that the figures published on Tuesday show that the fall of $668 million of gold and currency reserves was spent to hold off the rise in interest rates and thus save the Chancellor's face during the Tory party conference? If so, that is a shocking waste of the country's reserves.

Mr. Lawson: It is difficult to satisfy the Opposition. They complain when interest rates are high. However, when reserves are used tactically at a particular time to ensure that a rise in interest rates can be held to 1 per cent. and not 2 per cent., they complain about that.

Building Societies Association

Mr. McCrindle: asked the Chancellor of the Exchequer when he last met the Building Societies Association; and what topics were discussed.

The Economic Secretary to the Treasury (Mr. Ian Stewart): My right hon. Friend has not met the Building


Societies Association this year. I have myself met the BSA three times, mainly to discuss aspects of the recent building societies legislation.

Mr. McCrindle: Will my hon. Friend tell the building societies, and more particularly their customers, that the Government have no intention of restricting mortgage tax relief either to first-time buyers, as has been suggested in some quarters, or to those who are paying the standard rate of tax alone? Would that not create a log jam at both the top and the bottom of the housing market, which would do no one any good?

Mr. Stewart: I am grateful to my hon. Friend for drawing attention to this point. He will have noted the answer that my right hon. Friend the Prime Minister gave last week. The building societies and all those with mortgages — 8 million of our fellow citizens — should beware that the Labour party, through the Leader of the Opposition, has now made it clear that under a Labour Government only those who are young, who have many children or who fall on hard times would get the full benefit of mortgage interest relief.

Mr. Freeson: Would it not be appropriate to switch the burden of mortgage tax relief to repair and renewal funds instead of incurring the considerable expenditure indulged in by way of relief on the capital purchase? More specifically, will the Minister discuss as quickly as possible with the Building Societies Association putting an end to the idiotic and unfathomable rule which the Treasury imposes and which as a general proposition prevents the investment of millions of pounds in the provision of rented housing, of which we are in dire need, because it will not allow the marriage between grants and private investment in rented property?

Mr. Stewart: It is extraordinary that an Opposition Member should speak about the problems of rented accommodation when it is the Labour party's policies that have prevented the revival of the rented sector. Mortgage interest tax relief contributes satisfactorily to the growth of owner-occupation. I am glad to be able to say that that figure has now reached 62 per cent., compared with 55 per cent. when the Conservative party came to power.

Mr. Leigh: Has my hon. Friend received any representations on mortgage tax relief from the alliance parties? Before he conveys those views to the Building Societies Association, will he say whether he has decided which alliance spokesman to believe? Is it the leader of the SDP, who appears to believe that tax relief should be abolished altogether, or the experienced and distinguished Treasury spokesman for the Liberal party, who believes that it should be restricted to basic rate taxpayers? Is the alliance as disorganised, as disunited and shambolic on this issue as on any other?

Mr. Stewart: The policies of all the Opposition parties on these matters are in a state of confusion, but the one common theme to each is that they want to cut back on mortgage interest tax relief, to the damage of home ownership.

Dr. McDonald: Will the Minister care to note, as he seems to have failed to understand the words of either my right hon. Friend the Leader of the Opposition or other Front-Bench spokesmen, that the party's policy is to retain mortgage tax relief at the standard rate, not to allow mortgage tax relief at the higher rate, and to give further

help to first-time buyers, such as my constituents, who face not only exceptionally high interest rates, which are this Government's responsibility, but high prices for such houses as they might wish to buy? Those three points have been made clear repeatedly both by the leader of the Labour party and by other Labour Front-Bench spokesmen.

Mr. Stewart: I am always interested to note what the hon. Lady says. I note it with particular attention when what she says is so different from what the leader of her party has said.
I remind the House that, only a few days ago, the Leader of the Opposition said that he was advocating arrangements which would mean that
young people, people with maximum family responsibilities to children or dependent relatives, and people who experience inadvertant falls in income, derive maximum benefit".
The only way that such people can derive maximum benefit, unless extra resources are devoted to mortgage tax relief, is for all others to suffer. The other 8 million had better watch out.

Inflation

Mr. Andrew MacKay: asked the Chancellor of the Exchequer if he will make a statement on the current level of inflation.

Mr. Lawson: The retail prices index increased by 3 per cent. in the 12 months to September.

Mr. MacKay: Does my right hon. Friend agree that the impressively low level of inflation enjoyed in this country today could be put in jeopardy if we continue to have high wage increases which bear no relation to productivity?

Mr. Lawson: We do have a problem with wage increases running far in excess of productivity. That is perfectly true. I believe that this is basically a threat to jobs and that is why I am concerned about it. It is not a threat to inflation which can be kept under control by our monetary policy.

Mr. Penhaligon: Does the Chancellor agree that the current level of inflation cannot sustain the personal credit explosion which is currently taking place at a level of 140 per cent. over the past 12 months? Does that mean that the Chancellor is to allow inflation to increase? Will he take measures to control credit? Or is he just hoping that it will all hang together for another 12 months?

Mr. Lawson: I am perfectly happy to rest on this Government's record on inflation. We have brought inflation down from the peak of 27 per cent. that occurred when the Labour Government were in power, supported by the Liberal party, to the present level of 3 per cent., which is one of the lowest levels it has been for the past 20 years. The policies that brought inflation down will continue to remain in place and ensure that it remains low.

Mr. Dickens: Is my right hon. Friend aware that, because of the firm grip that the Government have kept on inflation, the risk-takers, entrepreneurs and job creators who went abroad are returning to Britain? Those people were driven abroad by the high taxation and high inflation of a Socialist Government. I hope that the voters of Knowsley, North remember that.

Mr. Lawson: As usual, my hon. Friend is absolutely right. I would add that a further important change has


arisen as a result of the new tax climate and the sharp reduction in inflation. We now have more new business formation than ever before. Every week 500 new businesses net are set up. That is one of the most important seeds for the future which can give us encouragement and which we have sought for a long time.

Mr. Duffy: Is the Chancellor aware that his known assessment of the underlying rate of inflation is based on an underestimate of sterling depreciation which, under the law of one price, affects not only imports but works through to all goods and pay, and eventually even to the non-trade sector?

Mr. Lawson: The answer that I gave concerned the retail prices index for September as calculated by rules which have been accepted by parties on both sides of the House. Despite its defects—and it may have some—it is the best and generally acknowledged measure of inflation that we have. If the hon. Gentleman is thinking of future inflation, I shall have something to say about that later today.

Mr. Dorrell: Does my right hon. Friend agree that the speech that was recently delivered in Loughborough by the Governor of the Bank of England on the role of monetary policy and the control of inflation strengthens the argument for Britain joining the exchange rate mechanism of the European monetary system? As we downgrade the importance of monetary aggregates in the control of inflation, are we not by implication increasing the importance of stabilising the external value of the pound?

Mr. Lawson: I am sure that my hon. Friend was especially pleased that the Governor of the Bank of England gave his important lecture on monetary policy in his constituency. It is a lecture that will repay reading by the whole House. As for my hon. Friend's question about the exchange rate, of course it is important, and it would be highly undesirable to see a continuing depreciation of the exchange rate, which would inevitably cause faster inflation. That I am determined to avoid.

Mr. Heffer: The people of Knowsley, North now have to pay more for their bus fares as a result of the deregulation of the buses. Is that an increase in inflation, or not?

Mr. Lawson: The rate of inflation of 3 per cent. is less than half the lowest figure that it ever reached in any month under the Government whom the hon. Member supported.

Mr. Latham: Will my right hon. Friend repeat what he said in his Budget statement—that there is a good case for petrol prices to come down again? They seem to go up a lot quicker than they come down.

Mr. Lawson: My hon. Friend, who is an acute observer of petrol price movements, may well be right. I am glad to say that petrol prices have indeed come down since the Budget, just as I predicted that they should and would. I recall that the Opposition said that nothing of the sort would happen. I was right and the Opposition, as usual, were wrong. Petrol prices are lower than at the time of the Budget.

Mr. Gould: As the Chancellor presumably authorised the Governor of the Bank of England to announce the abandonment of sterling M3 as a monetary target, are we to assume that the whole disastrous monetarist experiment

of the past seven years has been nothing more than a mistake? Has the Chancellor yet made up his mind—if so, perhaps he could let us into the secret—about what new mistake he intends to use to replace the old one?

Mr. Lawson: May I take this first opportunity to congratulate the hon. Gentleman, not merely on his election to the Labour party shadow Cabinet, but on his membership of the Opposition Treasury team? I read in one of the newspapers that his promotion to that job would add much-needed talent to a lack lustre Opposition team. I should like, on behalf of the Government, to associate myself with those remarks.
As to the hon. Gentleman's question, it is clear that, in the short time that he has been in his important job, he has not had time to read the Governor's lecture fully. I am sure that he will do so. As for the monetarist experiment to which he referred, I would observe that the proof of the pudding is in the eating and that it has brought inflation down to the lowest level for 20 years.

Season Tickets (Tax Relief)

Mr. Amess: asked the Chancellor of the Exchequer if he will introduce legislation to provide tax relief at the basic rate on season tickets.

Mr. Brooke: No, Sir.

Mr. Amess: Although I am fully aware of the enormous pressure that the Treasury is under to give such assistance, does my hon. Friend appreciate the attractiveness of such a proposal for the hard-pressed commuter who faces increasing transport costs? Does my hon. Friend agree that if he undertook such a proposal it might lead to a reduction in the amount of traffic on our roads?

Mr. Brooke: As 2½ per cent. of the entire country's work force commutes to my constituency daily, I am familiar with the problem, but the expense of home-to-work travel has never been allowable for tax relief. Where people live has been regarded as a personal decision, so travel has been regarded as a personal expense.

Mr. Snape: Does the Minister agree that the proposal is eminently reasonable, socially desirable and would bring some much-needed equalisation into the Exchequer's treatment of various forms of motor transport — three reasons for probable disqualification in the eyes of the Chancellor?

Mr. Brooke: I answered the question asked by my hon. Friend the Member for Basildon (Mr. Amess) with the words, "No, Sir." and I give the hon. Gentleman the same answer.

Charitable Gifts

Mrs. Virginia Bottomley: asked the Chancellor of the Exchequer what representations he has received about his Budget proposals to encourage charitable gifts.

Mr. Ian Stewart: The Budget proposals to encourage charitable giving were warmly welcomed by hon. Members on both sides of the House and by charities themselves. They represent the most substantial package of tax concessions for charities and charitable giving ever introduced in a single Budget.

Mrs. Bottomley: Can my hon. Friend confirm that charitable giving has more than doubled since the


Government came to power? What expectations has he for further realising our people's sense of responsibility and generosity?

Mr. Stewart: The contributions to charity through covenants, bequests and other means have risen dramatically since the Government took office. However, I still suggest that the payroll giving scheme and the measures introduced by my right hon. Friend the Chancellor in his Budget earlier this year will be regarded as some of the most important encouragements to charitable giving that have ever been introduced and I hope that they will be fully exploited. I also hope that hon. Members on both sides of the House will encourage charities and employers in their own constituencies to take part in the new scheme.

Mr. Alan Howarth: In respect of the Government's welcome initiative on payroll schemes for charitable giving, does my hon. Friend agree that the timetable between the end of the consultation period and the inception of the scheme next April will be very tight? Therefore, will he announce his definitive regulations as early as possible? Is he also able to say that the Government's own employees will be able to participate in such schemes?

Mr. Stewart: I note my hon. Friend's point about the need to have the regulations in place. The scheme is necessarily somewhat complicated. However, we published draft regulations last week. We hope that representations on those will be forthcoming as soon as possible, certainly during this month. We would then naturally want to publish the regulations in definitive form as early as we can. We want to give charities, employers and employees the longest possible notice to implement the scheme. Those who will want to take part will need to have the formal regulations available before they make their decisions.

Unemployment Levels

Mr. Nellist: asked the Chancellor of the Exchequer if he will make it his policy to include a forecast of the levels of unemployment in his next Budget; and if he will make a statement.

Mr. MacGregor: No. It has not been the practice of this or previous Governments to publish forecasts of unemployment.

Mr. Nellist: Is not the real reason for that answer the fact that, despite the 18 statistical fiddles that the Government have used to count the number of unemployed in the past seven years, the only hope that the Government see for bringing the unemployment figures below 3 million by the time of the general election is through further statistical fiddles? The Government's own figure shows that there are 7,154 unemployed in Coventry, South-East, costing £46 million a year in benefits and costing those in work £35 a week. Is not the only hope for the unemployed in Coventry, South-East, not more statistical fiddles, but a change of Government?

Mr. MacGregor: Not at all. I must make it clear that we are simply following previous practice. There is no question of any change in the publication of forecasts of unemployment. The hon. Gentleman never understands that it is customers for goods and services at home and

overseas who create jobs. They are hugely put off by the sort of activities which the hon. Gentleman and his colleagues previously undertook and encouraged in British industry, which did so much to destroy jobs. It is the reverse of that which is the greatest hope.

Mr. Churchill: Although the levels of unemployment remain unacceptably high, is it not noteworthy that this country has a higher proportion of its population of working age in employment than any other major country in western Europe? Will my right hon. Friend take steps to make that fact more widely known?

Mr. MacGregor: My hon. Friend is right and I am extremely grateful to him for giving me another opportunity to make that fact known. There is only one other country which has a higher proportion. What is more, in this country our level of youth unemployment is below the EEC average, and falling. It is also true that we have had an employment increase. It is important to emphasise, as my hon. Friend did, employment rather than simply unemployment. It is true that we have had an employment increase in the past 13 quarters, which is the longest period of continuous employment growth for almost 30 years. Those are the facts and my hon. Friend is entirely right in emphasis.

Mr. Terry Davis: Will the Chief Secretary admit that the reason why the Government will not publish the forecast is not that the forecast does not exist but that if they did publish it it would confirm what everybody knows, which is that the Government have no hope to give the people who have no jobs?

Mr. MacGregor: That is simply not true. We are following the practice of previous Governments, none of whom have produced long-term forecasts on unemployment.

Asset Sales

Mr. James Lamond: asked the Chancellor of the Exchequer what is the latest estimate of the proceeds from asset sales for 1986–87.

Mr. MacGregor: Privatisation proceeds in 1986–87 are expected to be about £4¾ billion, as indicated in the 1986 public expenditure White Paper.

Mr. Lamond: As the gas industry in this country already has the widest possible ownership, that is, every citizen of the land, what is the point of continuing with a £20 million advertising campaign — all at the cost of consumers of gas? That is enough money to provide every retirement pensioner in this country with a week's free gas to see them over the winter.

Mr. MacGregor: What the Government have been embarking on in their privatisation programme is not only of great benefit to industry and the economy, but provides true public ownership by the wider extension of shares.

Oral Answers to Questions — PRIME MINISTER

Engagements

Mr. Simon Hughes: asked the Prime Minister if she will list her official engagements for Thursday 6 November 1986.

The Prime Minister (Mrs. Margaret Thatcher): This morning I presided at a meeting of the Cabinet and had


meetings with ministerial colleagues and others. In addition to my duties in this House, I shall be having further meetings later today.

Mr. Hughes: Has the Prime Minister had time today to reflect on the seven and a half years of her premiership, and especially on the statement made during the 1979 election that her Government's first task would be to create jobs for our economy? In 1983 the Government said that their greatest task was to create a prosperous economy providing jobs for our people. Can she therefore explain how, in this capital city, unemployment has increased from 2·9 per cent. to 9·4 per cent., with 400,000 people now out of work in London alone? Is there not one answer to that—cruel failure?

The Prime Minister: Since 1983, 1 million net new jobs have been created, which has brought hope to 1 million more people. The hon. Gentleman asked why that has not had a greater effect on the unemployment register. There are three reasons for that: first, unit wage costs are still rising faster than elsewhere; secondly, the continued increase in the population of working age due to the baby boom of the 1960s; and, thirdly, continued reduction in overmanning in manufacturing industry.

Mr. Waller: At this time, when we remember the sacrifices made by our service people in two world wars, will my right hon. Friend look into the actions of those local authorities which, amazingly, have specifically banned those in receipt of service and police pensions from seeking employment with them? Is she aware that the Labour-controlled Bradford council has specifically excluded service pensioners from seeking a job with it? Is that not a slap in the face for all those who have served their country with distinction?

The Prime Minister: I saw that report and I hope that all local education authorities will use the very good teachers who are available and who have served in the forces, especially for subjects such as mathematics and physics. I urge all local authorities to exploit any potential source of good quality teachers. They will find those teachers among people who have served in the armed forces.

Mr. Kinnock: Does the Prime Minister recall telling me on Tuesday that it was for the governors of the BBC to reply to the attacks made by her right hon. Friend the Chancellor of the Duchy of Lancaster? Now that those governors have convincingly rebutted 39 out of the 40 charges made by her right hon. Friend, does she agree with the governors or with her right hon. Friend?

The Prime Minister: It is for the governors to answer the complaints. Perhaps the right hon. Gentleman will recognise that freedom of speech involves the freedom to make complaints — a freedom which he uses every Tuesday and Thursday.

Mr. Kinnock: The BBC has made no attempt to make an incursion into the freedom of speech of any member of the Government. The reverse is certainly not the case. That effort at coercion is so blatant and obvious. Is the Prime Minister accepting the claims of her right hon. Friend, or is she rejecting them? Is she on his side or on the side of the independence of the BBC?

The Prime Minister: The BBC exists because of a charter, a licence and an agreement. That is not embodied

in statute at all. Therefore, the governors have a special duty to see that that charter, that licence and that agreement are upheld. People are free to make complaints, and they do. It is up to the governors to answer them. In this instance, the governors have made a reply. It is not for me to judge between them.

Mr. Kinnock: The country will conclude that the governors of the BBC have discharged their duty to freedom, which is more than can be said for the Prime Minister.

The Prime Minister: Bearing in mind that it was the right hon. Gentleman's Labour authorities that tried to restrict the circulation of free newspapers, he is hardly in a position, when he supports that censorship, to make complaints himself.

Mr. Speed: Will my right hon. Friend find time in between her official engagements today to congratulate Mrs. Jo Hawkes, who was the alliance parliamentary candidate in Ashford at the last election, who today joined the Conservative party?

The Prime Minister: I gladly do so. She is welcome, and I wish her well in her future career.

Mr. James Callaghan: In view of the Prime Minister's difficulties in answering questions from my right hon. Friend the Leader of the Opposition, may I ask how much longer she intends to allow the Chancellor of the Duchy of Lancaster to go on making a fool of the Government?

The Prime Minister: The right hon. Member for Cardiff, South and Penarth (Mr. Callaghan) joins his right hon. Friend the Leader of the Opposition in making effective use of freedom of speech, which is freedom also to make complaints. I hope that he is not himself trying to stem that freedom by making any suggestion that the BBC has anything other than a duty to uphold the terms of the charter, the licence and the agreement.

Mr. Michael McNair-Wilson: Does my right hon. Friend agree that the best way for the BBC to allay suspicions of bias and distortion is not for it to sit as judge and jury in such matters, but for it to be answerable, as other television companies might be made answerable, to an independent broadcasting council, to which aggrieved parties could make representations?

The Prime Minister: The difference between the BBC and other television companies, and some of the independent broadcasting companies, is that the other companies are bound by statute passed by the House. The BBC is not bound in any way, which is why complaints have to be made to the governors. I understand that it would be very difficult to take that charter or licence or agreement to court, which imposes on the governors special duties and responsibilities.

Mr. Loyden: asked the Prime Minister if she will list her official engagements for Thursday 6 November.

The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.

Mr. Loyden: Will the Prime Minister now accept that the questionnaire from the Department of Employment to the unemployed is unnecessary and, indeed, is seen by many in the informed sections of the benefit system as a vicious attack on the unemployed? Will the right hon.


Lady now advise the Secretary of State to withdraw this obnoxious document, so that those who have a right to benefit can claim it?

The Prime Minister: No, Sir. As I said to the House when the same question came up last week, the test of availability for work was confirmed by the Labour Government in the Social Security Act 1975. The hon. Gentleman now therefore wishes to disregard that Act, which was brought in by his own Labour Government.

Mr. Stern: asked the Prime Minister if she will list her official engagements for Thursday 6 November.

The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.

Mr. Stern: In the course of her busy day, will my right hon. Friend find time to consider an inquiry into the use by education authorities of section 11 money, which is provided for the teaching of English to members of ethnic communities, in view of the apparent use of that money by authorities such as Brent, and possibly Avon, for the promotion of black racism?

The Prime Minister: I am aware that two cases have been reported, and the Home Secretary has asked Brent for further information about the use to which it is now proposing to put section 11 grants. He has made it clear that no grant will be paid unless he is satisfied by the reply. The Avon multicultural education centre is also the subject of inquiry by the Home Office, with particular reference to the eligibility for section 11 grant of certain posts there.

Mr. Steel: In the wake of the controversy between the Chancellor of the Duchy of Lancaster and the BBC, will the Prime Minister undertake to clarify to all her colleagues the distinction between public interest and party interest? Is she aware, for example, that another of her hon. Friends has been writing to business men in his constituency offering direct access to Government Ministers at a fee of £35 payable to his Conservative association, and, further, claiming it, outrageously, to be a legitimate business expense? Will the Prime Minister recognise that there is a need to draw a clear distinction between the interests of good government and the interests of her party?

The Prime Minister: If the right hon. Gentleman has any complaints to make, I am sure that he will make them to the proper authorities. With regard to Government and party, as the right hon. Gentleman is aware, I am responsible for answering from the Dispatch Box for Government. He equally knows that I am not responsible for answering for party. Although I have done so on the BBC matter, it is not strictly within my course of duty from the Dispatch Box.

Mr. Conway: Bearing in mind my right hon. Friend's responsibility as First Lord of the Treasury for financing the armed forces, may I ask whether she has had time to read this week's survey showing that the majority of young people in Britain would welcome an opportunity to participate in a form of national service? In view of the highly successful expansion of the Territorial Army, will my right hon. Friend introduce a Royal Commission to examine how the young people of Great Britain can serve their country?

The Prime Minister: I saw that report, but our armed forces are based on the existence of voluntary professional

armed forces and we do not have any plans at the moment to change that. There are a number of youth training places which can be served in the armed forces and those, I think, are earnestly sought after. I said that at the moment we have no plans to change that. It would, of course, be extremely expensive to alter the whole nature of our armed forces, which I do not wish to do.

Mr. Foulkes: asked the Prime Minister if she will list her official engagements for Thursday 6 November.

The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.

Mr. Foulkes: Can the Prime Minister explain what circumstances have changed since June to justify our ambassador at the United Nations attacking the Nicaraguans for using the judgment of the world court, which the Foreign Office welcomed when it was promulgated in June? Is this the too-high price that we have to pay for American support over Syria?

The Prime Minister: The hon. Gentleman is talking nonsense in the latter part of his question. Although we had no legal objection to the resolution, we were not prepared to support the attempt by Nicaragua to exploit a legal judgment for its own—[Interruption.] —political ends. The Government in Nicaragua are increasingly repressive in their methods and in recent months have taken action—[Interruption.]

Mr. Speaker: Order. The Prime Minister is entitled to a hearing.

The Prime Minister: In recent months the Government of Nicaragua have taken action to close the Church radio station and newspaper. They also continue to intervene to promote subversion outside their borders, thus threatening the stability of the region.

Mr. Holt: Reverting to the BBC, does my right hon. Friend recall, before the current episode blew up with the BBC, the Ian Curteis play? Is she aware that it was specifically banned from being broadcast, on the direct instructions of the director-general, because it showed the Government and my right hon. Friend in a good light?

The Prime Minister: I am sure that if my hon. Friend has that complaint he can make it to the appropriate authorities.

Mr. Snape: asked the Prime Minister if she will list her official engagements for Thursday 6 November.

The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.

Mr. Snape: Will the Prime Minister speak to her right hon. Friend the Member for Chingford (Mr. Tebbit) today and ask him to moderate his intemperate attacks on the BBC? Is she aware that her hon. Friend the Member for Derbyshire, South (Mrs. Currie) makes almost nightly appearances on the media? Will the Prime Minister ask her hon. Friend to do two things; first, ensure that a red warning triangle is exhibited, and secondly, curb her appearances before I start believing that the BBC is biased against the Conservative party?

The Prime Minister: I am delighted that the hon. Gentleman and so many other Opposition Members have so few complaints about the economy that they can concentrate on the sort of trivia that has been raised during this Question Time.

Autumn Statement

The Chancellor of the Exchequer (Mr. Nigel Lawson): With permission, Mr. Speaker, I should like to make a statement.
Cabinet today agreed the Government's public expenditure plans for the next three years. In the normal course of events that would be followed by the publication of the printed autumn statement, accompanied by an oral statement to the House, next Tuesday. For obvious reasons, that is not possible this year. So while the autumn statement will be printed in the normal way and presented to Parliament as soon as the House reassembles next Wednesday, I thought it would be for the convenience of the House if I made my oral statement today. This will cover all three of the key elements in the printed statement: the Government's outline public expenditure plans for each of the next three years and the expected outturn for this year; proposals for next year's national insurance contributions; and the forecast of the economic prospects for 1987 required by the Industry Act 1975.
The full text of the economic forecast, together with the public expenditure figures and the rest of the information customarily published with this statement, will be available from the Vote Office as soon as I have sat down. They will also appear in the printed autumn statement to be published next week.
I turn first to the outturn for the current financial year, 1986–87. The public expenditure planning total now looks likely to amount to almost £140½ billion—£1¼ billion, or a little less than 1 per cent., above what was allowed for in this year's public expenditure White Paper. The main reason for this excess is a 9 per cent. rise in the current spending of local authorities — far more than was provided for.
However, other items on the expenditure side, the largest of which is debt interest, are likely to fall short of what was forecast at the time of the Budget, thus reducing the total overrun on the expenditure side to about £1½ billion.
On the receipts side, the North sea tax take is likely to be even lower, by about £1 billion, than I envisaged at the time of the Budget, largely because for a long period the oil price has been below the $15 a barrel level on which the Budget arithmetic was explicitly based. This shortfall, however, is more than offset by the continuing buoyancy of non-oil tax revenues, in particular VAT and corporation tax. Non-oil revenues now look likely to exceed the Budget forecast by £2 billion. This would imply a net overrun on the receipts side of about £1 billion, rather more than that on the expenditure side. But this will be reduced by a change I propose to make to the North sea fiscal regime.
The collapse of the oil price has led to a sharp cutback in investment activity in the North sea, with inevitable consequences for the United Kingdom offshore supplies industry both in Scotland and the north-east of England. I therefore propose, on a carefully targeted basis, to accelerate the arrangements for the repayment to the oil companies of advance petroleum revenue tax due to them. The details of this change, which will require legislation early in the new Session of Parliament, are set out in a press notice which the Inland Revenue will be issuing as soon as I have sat down.
The new arrangements will have a revenue cost this financial year of some £300 million, which will be fully recouped over the next three years. Taking this into account, the public sector borrowing requirement for the current year is still forecast to be about £7 billion, the figure I set in the Budget.
I turn now to the public expenditure plans for the next three years. Since 1982–83, public spending, both before and after deducting the proceeds of privatisation, has been declining as a proportion of national output. It is set to be lower still this year. The Government are determined to ensure that this trend continues—to see to it that total public spending, even without taking account of privatisation proceeds, continues to decline as a percentage of GDP.
The plans I am about to announce for the next three years secure that objective. Indeed, they show that by the end of the period the ratio of public spending to national output will be back to the level of the early 1970s. But within this overall constraint, and in the context of their policy priorities, the Government have felt it right to allow an increase in the previously announced planning totals for 1987–88 and 1988–89.
Compared with the prospective outturn for the current year, we are now planning for an average growth in the public expenditure planning total of about 1¼ per cent. a year in real terms — well within the prospective growth of the economy as a whole. The new planning totals have thus been set at £148½ billion for 1987–88 and £154¼ billion in 1988–89, an increase of £4¾ billion and £5½ billion respectively over the totals previously published. For 1989–90, the planning total has been set at £161½ billion.
As usual, these totals incorporate estimates for the proceeds of privatisation. Last year I increased the estimate of these proceeds very substantially to £4¾ billion in each of the three survey years, a figure which I expect to be duly achieved this year. Although the privatisation programme is now moving ahead more strongly than evervfhjbp;[before, I have decided to make only a modest further addition to this estimate, bringing it to £5 billion in each of the next three years. The new planning totals also contain substantial reserves, rising from £3½ billion in 1987–88 to £7½ billion in 1989–90.
The public expenditure increases I have announced allow us to make realistic provision both for local authority current expenditure, over which the Government have no direct control, and for demand-led programmes such as social security, while still leaving scope for increased spending on services to which the Government attach particular priority.
But before referring to some of the more important changes, let me make one thing absolutely clear. There can be no question of allowing the projected increases in public expenditure over the next two years to undermine the prudence of the Government's overall fiscal stance. The Government's fiscal stance has been clearly set out in the medium-term financial strategy published at the time of this year's Budget. There will be no relaxation of that stance.
Within the totality of public expenditure, the largest increase is for the local authorities, whose current spending next year is now put at £4 billion above the previous provision. This in part reflects the fact that the previous plans simply carried forward the same level or cash spending as in 1986–87. At the same time, we are increasing next year's aggregate Exchequer grant — the


contribution that taxpayers make to local government spending — by almost 10 per cent. over this year's settlement, a rise of almost £1½ billion.
These substantial sums demonstrate in particular the priority the Government are giving to education, which, including the new proposals on pay and conditions of service for teachers announced last week, accounts for about half the total increase in provision. There is also a substantial increase in provision for the police.
On top of the increased provision for the cost of education in schools, which is contained within local authority current spending, there will be additional spending on the universities of £60 million in 1987–88 and £70 million in 1988–89.
Spending on the health and personal social services will be increased by more than £600 million. For the National Health Service alone, the increase in England amounts to more than £300 million a year. Combined with the additional resources being generated by greater efficiency, this will not only enable the Health Service to cope with the growing number of elderly patients, but will also allow it to improve services.
Gross provision for housing investment is being increased by £450 million. This will sustain the rising trend of spending on local authority renovation and improvements and provide additional resources for the housing associations.
In the light of this year's experience, £1¾ billion has been added to next year's provision for social security, most of which represents a greater expected expenditure on existing means-tested benefits.
Provision for investment in roads is being increased by £65 million next year and £75 million the year after, mostly for local authority roads.
For defence, the provision remains as planned in the last White Paper after allowing for minor changes, including a reduction in the estimated cost of the Falklands deployment. The defence programme will continue to benefit from the substantial real growth in previous years and the wide-ranging action to improve efficiency and value for money.
Taking all programmes together, the additions to planned capital expenditure amount to getting on for £1 billion in 1987–88, of which about two thirds is local authority spending. Further details of these and other changes will be contained in the printed autumn statement which will be published as soon as the House returns next week. In addition, full details, together with information on running costs and manpower, will be given in the public expenditure White Paper early in the new year.
I now turn to national insurance contributions. The Government have conducted the usual autumn review of contributions in the light of advice from the Government Actuary on the prospective income and expenditure of the national insurance fund, and taking account of the benefit uprating which my right hon. Friend the Secretary of State for Social Services announced on 22 October.
The lower earnings limit will be increased next April to £39 a week, in line with the single person's pension, and the upper earnings limit will be similarly raised to £295 a week. The limits for the reduced rate bands which I announced in last year's Budget will also be increased again in April but by proportionately larger amounts. The upper limit for the 5 per cent. and 7 per cent. bands will

be raised to £65 a week and £100 a week respectively, and the upper limit for the 9 per cent. rate for employers will be raised to £150 a week.
The taxpayers' contribution to the national insurance fund — the so-called Treasury supplement — will be reduced by 2 per cent. to 7 per cent., but this will not require any change in contribution rates. Thus, the main class I contribution rates will once again remain unchanged at 9 per cent. for employees and 10·45 per cent. for employers.
Finally, I turn to the Industry Act forecast. Both growth and inflation have turned out to be slightly lower this year than I envisaged at the time of the Budget. Growth now looks like turning out at 2½ per cent., against a Budget forecast of 3 per cent., and inflation in the fourth quarter of this year is likely to be 3¼ per cent. against the Budget forecast of 3½ per cent.
The principal reason for this slower growth has been the disappointing performance of exports, which were hard hit by the cutback in spending by OPEC and other primary producers affected by the sharp fall in commodity prices in general and the oil price in particular.
Combined with a halving in the value of our own oil exports, this has meant a significant deterioration in the current account of the balance of payments, from a surplus of some £3½ billion in 1985—and a cumulative surplus of £21 billion over the six years from 1980 to 1985 inclusive —to a forecast of broad balance for 1986.
Looking ahead to 1987, the prospects are generally encouraging.
While the necessary adjustment of the exchange rate to the oil price collapse has now taken place, it will inevitably take time before the full benefits come through in higher non-oil exports and lower import growth. This means that we can expect the current account of the balance of payments to go into deficit next year, for the first time since 1979, to the tune of some £1·5 billion. Even so, non-oil exports are forecast to rise next year by 5·5 per cent. compared with an increase of only 1 per cent. this year, with manufacturing output in consequence up by 4 per cent. And with domestic demand continuing to expand at the same rate as this year, the economy overall is likely to grow by a further 3 per cent. next year — the sixth successive year of steady growth at an average annual rate of almost 3 per cent.
Recorded inflation is likely to edge up a little, to 3·75 per cent. in the fourth quarter of 1987. This is almost entirely due to the effect on the RPI of the timing of mortgage rate changes. The Government's commitment to a monetary policy that will squeeze out inflation remains unabated.
Meanwhile the likelihood of faster growth next year, coming at a time when unemployment already appears to have stopped rising, suggests that the prospects for some fall in unemployment are now more promising. But this promise could still be frustrated by excessive pay settlements.
The strategy that we have followed since 1979 has brought inflation down to the lowest level for two decades, combined with sustained growth and steadily rising living standards. This is a combination that has eluded successive Governments for a generation. We have brought it about by the determined pursuit of free markets and sound money. And that is what we shall stick to.

Mr. Roy Hattersley: First, I welcome the increased expenditure on health, housing and education, small though the increases in the health and housing budgets are. The sick, the homeless and parents will wish that there could be a general election every year. They will wonder why they have waited so long. They will not believe that the sudden change of heart and sudden change of judgment could possibly survive a Tory election victory.
Let me tell the Chancellor straightaway that his figures and forecasts are treated with increasing suspicion, not simply inside the House, but outside it. Therefore, I shall ask him a series of specific questions about the numbers that he has half offered us today. Will he confirm that programme spending is forecast to increase by £7·5 billion in 1987–88 — £4·7 billion on the planning totals, £250 million from privatisation, and £2·58 billion from the contingency reserve?
Will the Chancellor confirm that much of that extra spending is not the result of his careful planning, but the product of overspending this year, which he attempted, but failed, to control and is now taking on into the year that follows? Education at £1·6 billion, social security at £1·6 billion and the EEC at £440 million represent expenditure to which the Chancellor was passionately opposed when they came about.
There is a coy reference in paragraph 29 of his statement to a "greater expected expenditure" on existing means-tested benefits. Translated into English, that means that long-term unemployment has been far greater than the Chancellor kept on pretending that it would be both a year ago and at Budget time. Does the right hon. Gentleman agree that the buoyancy of non-oil tax revenue is largely the result of wage increases which have outstripped inflation — wage increases which he has constantly condemned, which he attempted to reduce, and for which he now attempts to take the credit?
Is it surprising that, against that background, the House and the country will be wholly sceptical about the right hon. Gentleman's conversion to public spending and the continuation of such policies over a substantial period? So that we can better judge the Chancellor's sincerity, will he make it clear where he stands on the whole variety of targets that were once the centre piece of his policy? Does he support the Governor of the Bank of England in his view that broad money targets should be abandoned? If he does, will he confirm that the medium-term financial strategy, of which he is the author, has finally been laid to rest?
Furthermore, will the Chancellor tell us about the fiscal adjustment, about which we heard so much last year and the year before until it suddenly disappeared? He is right to say that we have heard nothing about it, and that is why our suspicions are increased about the honesty and integrity of his figures. In the March forecast, we were told that the figure would be £2 billion, and that has been spent. Does that mean that there will be no cuts in taxes next year or that the Chancellor will increase the public sector borrowing requirement—not dealt with in the statement —to accommodate tax increases? If he will do neither, will he once more preside over an increase in the total tax burden that the Government levy?
Does the Chancellor realise that the current account deficit is more optimistic than that predicted by any other forecast, and that each forecast is absolutely incredible? Is not the economic outturn now worse than what he

predicted at Budget time in a number of crucial areas? I shall ask him, item by item, to confirm or deny that. Is it or is it not a fact that the balance of payments is £3½ billion worse than he forecast at Budget time? Is it or is it not a fact that output in the first half of this year has increased at half the speed that was forecast at Budget time? Is it or is it not a fact that exports have risen at less than one fifth of the rate forecast at Budget time?
Despite all that, and despite all those prospects being worse, the Government propose greater spending than when the prospects were better. Is the Chancellor surprised that we are sceptical about his proposals or that he is fast losing any reputation he ever possessed for financial respectability?
In previous years, in an attempt to sustain his reputation, the Chancellor has done deep damage to the real economy. Now, he is cynically pretending to change course, and one question above all must be asked of him: Having made this apparent swerve, how does he justify the waste and suffering in th seven years of his previous policy? How does he justify the cuts in Government expenditure that robbed the pensioners and closed hospitals, or the medium-term financial strategy, which added 2 million to total unemployed? That was supposed to be the price of getting the economy right. The economy is not right, yet unemployment remains at an unacceptable level. Today's statement has done nothing to help in that essential area.

Mr. Lawson: Since the right hon. Gentleman absented himself from the whole of Treasury questions to have time to mug up the questions he has just asked, I should have thought that he could have done a little better than he did. I shall do my best to answer the right hon. Gentleman's questions. I shall take them in the order that he asked them. [Interruption.] If right hon. and hon. Members do not want me to answer the right hon. Gentleman's questions, I shall not answer them. [Interruption.]

Mr. Speaker: Order. I ask the House to hear the Chancellor.

Mr. Lawson: The right hon. Gentleman referred to the public expenditure increase. I have already announced the public expenditure increase, and it is as he says. He then referred to the buoyancy of revenues. The buoyancy of revenues is due, above all, to two facts — first, continuing vigorous economic growth and, secondly, the greatly increased profitability of companies which has led to a large increase in the yield of corporation tax.
The right hon. Gentleman asked about the medium-term financial strategy. If he had been paying attention he would have heard me explicitly reaffirm the medium-term financial strategy.
The right hon. Gentleman asked about the fiscal adjustment. He may not be aware that last year I announced that I would, and I did from last year, discontinue the practice of giving the fiscal adjustment, because it is a misleading and unreliable essay. Subsequent events proved the rightness of that course.
He then asked about the PSBR for next year. I made it quite clear in my statement that the PSBR in 1987–88 will be held to 1¾ per cent. of GDP. So there will be no expansion of the PSBR.
The right hon. Gentleman said that some things, such as exports, are lower this year than I forecast at the time of the Budget, and that GDP is 2½ per cent. as against 3


per cent. That is absolutely right, as I announced in my statement. However, inflation was lower also. The right hon. Gentleman wondered how it was, when those items had fallen short of expectations, that I could announce an increase in public expenditure. Clearly he is unaware that the public expenditure increase is for the years ahead. As I have made clear, the prospect for the years ahead is for a growth of 3 per cent.—higher than the 2½ per cent. we have had this year. The right hon. Gentleman failed to take into account the fact that, since 1982–83, public expenditure has consistently fallen as a share of gross domestic product, and will continue to do so. That is in sharp contrast to the position when the Labour party was in government when, despite the IMF, it was rising faster than GDP. That is what got us into the problems that we had in the 1970s. The right hon. Gentleman accused me — if I took down his words correctly — of "cynically pretending to change course". I can assure him that we are not changing course.

Sir William Clark: Is my right hon. Friend aware that his statement will be welcomed, in as much as the borrowing requirement will not be increased but will be held as forecast? Will he re-emphasise that, this year, there is extra captial expenditure—the total is a lower proportion of GDP—and that, out of £148 billion the capital expenditure allocation will be over £22 billion?

Mr. Lawson: My right hon. Friend is right and I thank him for his remarks. Capital expenditure has been increased by almost £1 billion in 1987–88 over the previously published plans. The Opposition are on extremely shaky ground on capital expenditure because we all recall what they did to slash it on the Health Service, hospitals, roads and anything else on which they could lay their hands.

Mr. David Penhaligon: Does the Chancellor of the Exchequer agree that at least one conceivable weakness in his current strategy is the degree to which he is relying on the tax take that he receives from various resources as a result of the current credit boom, which is something that cannot be sustained? This is creating demand which in turn is creating consumption and imports, but it is not creating the jobs and investment that we require. The Chancellor admits in his statement that we shall have a balance of payments deficit. Could not his strategy lead to pressure on the pound in terms of interest rates and its valuation, and is it not right to say, to quote an American president, that we ain't seen nothing yet?

Mr. Lawson: That was rather a long question, if it was a question at all. If the hon. Gentleman is interested, the forecast for consumer demand in 1987 is a growth of 4 per cent. compared with 5 per cent. this year. The forecast is that consumer demand will be growing more slowly next year than this year, whereas both investment and exports will be growing more rapidly.

Mr. Terence Higgins: The statement as a whole is welcome, but does my right hon. Friend recall that those advocating higher public expenditure have stressed the importance of concentrating on capital rather than on current expenditure? Is he satisfied with the balance between the two? Is there not cause for concern

about the level of wage settlements, especially when they are linked to national wage agreements, which are a means of increasing unemployment in areas where it is highest?

Mr. Lawson: My right hon. Friend holds a position of special responsibility as the Chairman of the Select Committee on the Treasury and Civil Service, and he is right to point to the problems of excessive pay increases in the public sector. As I said in my statement, the greatest single area of growth is in local authority current spending. Some of the spending is very welcome, but roughly 45 per cent. of local authority current expenditure is on pay, excluding teachers' pay. The rapid rise in that expenditure, over which the Government have no direct control, is a major problem in getting the balance right between current expenditure and capital expenditure, about which my right hon. Friend is rightly concerned.

Mr. Robert Sheldon: Since the last public expenditure White Paper, how much has the reserve for 1987–88 and that for the following year been reduced? In other words, how far has the Chancellor of the Exchequer eaten into that contingency reserve? Since the previous autumn statement, has the assumption for unemployment next year been increased or reduced?

Mr. Lawson: The assumption for unemployment next year will appear in the Government Actuary's report, and will be slightly higher than the figure in the Government Actuary's previous report. The right hon. Gentleman will forgive me if I am wrong, but I think that the increase is 50,000, representing an increase that has already taken place. It is not a projection of a future increase. The reserve always comes down as the year rolls closer. The reduction is especially large this year and is one of £2¾ billion, from £6¼ billion to £3½ billion for 1987–88. The reduction is rather on the large side because, as I said in my statement, and as we stated explicitly in last year's autumn statement, the figure for local authority expenditure for 1987–88 had not been agreed. Therefore, we carried forward the same cash figure for 1986–87 and stated that we had made special allowance in a specially enlarged reserve to accommodate that. This year we have put in what we consider to be a realistic assessment of local authority current expenditure for all three years.

Mr. Michael Fallon: Is it not those who are lucky enough to work in the public sector who will gain most from the transformation of the star chamber into the school tuck shop? Cannot my right hon. Friend hold out any hope of reducing the heaviest burden of taxation on the lowest paid in the private sector, who do not have the advantages of those in the public sector?

Mr. Lawson: I think that some of my colleagues—I shall not mention names—who have appeared before the so-called star chamber will be slightly surprised to hear it described as a school tuck shop. My hon. Friend knows full well the nature of the Government's taxation objectives. Taxation, however, is a matter for the Budget and not one for now. Clearly a pound cannot be used twice. A pound which is used in higher public expenditure is not available for reductions in taxation.

Mr. Chris Smith: The Chancellor announced in his statement an increase of £450 million in expenditure on housing. As the Government, in their report last year, estimated that £20 billion were


required to bring local authority housing stock into a livable state of repair, do my constituents now have to wait 41 years for repairs to be carried out?

Mr. Lawson: I do not accept the figures which the hon. Gentleman has quoted, which were put together by local authorities, which made their own assessments of what they thought was necessary. The figures were published subsequently by the Department of the Environment. The statistics were provided by the local authorities in the various areas. The increase in housing expenditure, which I have announced, is an important one, and I hope that Opposition Members will not deride it.

Sir Edward du Cann: If my right hon. Friend is still seeking reductions in the absolute levels of expenditure in addition to the proportionate levels to which he referred, and large consequential reductions in taxation — we hope that we shall hear much more of both matters in his Budget next year — will he give urgent consideration to the proposal, which I think is supported in all quarters of the House, for the repatriation of agricultural policy? The runaway extavagance of the common agricultural policy is not only a continuing scandal, but the indiferrence of the member Governments of the European Community in grappling with it is something which is causing great impatience throughout the nation.

Mr. Lawson: I am sure that my right hon. Friend knows that Britain and its Government are taking the lead in seeking the reforms of the CAP that are long overdue. The problems of overproduction and subsidisation of food and agriculture are not peculiar to the European Community. It is a worldwide phenomenon: it is exactly the same in the United States, Japan and throughout the industrialised world. That is why my right hon. Friend the Prime Minister, at the Tokyo summit earlier this year, insisted on having for the first time in a summit communiqué mention made of a problem which the whole world must address. It is one of the greatest problems facing the world over the next 10 years.

Mr. J. Enoch Powell: Does the Chancellor of the Exchequer recognise that the ending of the long run of large surpluses on the current account of the balance of payments should be greatly welcomed in view of its beneficial effect upon the level of economic and, particularly, industrial activity?

Mr. Lawson: I note the right hon. Gentleman's views, although I do not believe that the linkage is quite as simple as he suggests.

Mr. David Howell: If there is to be an increase of £4·75 billion above the planned totals for public expenditure next year, and if, as my right hon. Friend says, there is to be no relaxation of the Government's fiscal stance, is it safe to conclude that there will be, thanks to the vigour and dynamism of the economy next year, a natural increase in revenue of about the same amount? If that is right, is it not an encouraging prospect for those of us who still want to see substantial tax cuts?

Mr. Lawson: I share my right hon. Friend's desire to see substantial, continuing tax cuts, but we shall have to wait until next year's Budget to see what the prospects will be.

Mr. Jack Ashley: Does the Chancellor seriously deny that, although he has been

talking about the prudence of the Government's overall fiscal stance, the reality is that he has just begun to paddle his electoral canoe with a moderate expansion financed by privatisation? Will he recognise that he will not get very far with the dead weight of mass unemployment costing £20 billion? The sooner he addresses his mind to that fact, the better it will be for the country and, indeed, for the Government.

Mr. Lawson: I share the right hon. Gentleman's concern at the level of unemployment. I should have hoped that he would welcome the fact that, over the past six months there has been no increase in unemployment. The most recent seasonally adjusted figures are the same as they were six months ago. As for paddling electoral conoes, I can well understand why the right hon. Gentleman is so nervous about the prospect of an election.

Mr. Alex Fletcher: Does my right hon. Friend agree that the autumn statement again refutes the bogus accusation that the Government have written off Scotland? Will he confirm that Government spending on public services in Scotland is now greater in real terms than it was in 1979 and that Scotland is also getting better value for money, as Government funds are aimed at greater efficiency in the public services and the creation of new jobs in the private sector rather than subsidising industries that are no longer competitive?

Mr. Lawson: My hon. Friend is right. He might also have added that we are blessed with a Scottish Chief Secretary.

Mr. Dick Douglas: Will the Chancellor reflect on the fact that, seven years after the Conservative party came to power and after receiving £50 billion in revenue from North sea oil, he predicts an encouraging internationally competitive position in 1987. What does he mean by "encouraging" in terms of the balance of payments and current account? In terms of North sea oil advance petroleum revenue tax, what effect is this likely to have on the cash flows of oil companies and on exploratory and development activities in the North sea in relation to Scottish employment?

Mr. Lawson: It is encouraging that the forecast is for growth of 3 per cent. in 1987—the sixth successive year of growth of 3 per cent. or thereabouts — and of inflation remaining low.
As for the North sea oil picture, with special reference to Scotland, about which the hon. Gentleman is something of an expert, the APRT change is deliberately geared precisely to the point to which he adverted. That is why it will require immediate legislation. It is to help the immediate cash flow position, particularly of smaller independent companies. That has an important bearing on the workload of the offshore supply industry in Scotland and in the north-east of England. It is a repayment of tax that has already been paid by them.

Mr. Ian Gow: In deciding what weight to give the shadow Chancellor's advice on these matters, will my right hon. Friend reflect on the fact that 15 December marks the eleventh anniversary of the infamous letter from a former Chancellor to the managing director of the International Monetary Fund and that that letter had been preceded by a rate of inflation of 26·9 per cent? Will my


right hon. Friend take this opportunity to reaffirm his own commitment and that of the Prime Minister to stable prices by the end of the next Parliament?

Mr. Lawson: That is certainly our aim and ambition. Having got inflation down, as my hon. Friend pointed out, from 26·9 per cent. at its peak during the last Labour Government to 3 per cent. today, it is the aim and ambition of the Government and myself to reach stable prices by the end of the next Parliament.

Mr. Ian Wrigglesworth: Will the Chancellor come clean and admit to the House that, along with the abandonment of his monetary targets, the autumn statement and the accompanying boasting press releases about public expenditure today, he has completed the abandonment of his past monetarist policies? Will he admit that he is doing that to generate a short-term preelection boom to seek a short-term party political benefit? Will he confirm that the long-term damage of the policy is borne out by the £1·5 billion balance of payments deficit, which he forecast this afternoon, and the assumption that there will still be over 3 million people unemployed in 1990? Will he change his policies so that demand is channelled into investment and exports rather than into consumption and imports?

Mr. Lawson: The hon. Gentleman is extraordinary. It is almost inevitable that, given the halving of our oil export earnings virtually overnight, there would be a period during which the balance of payments in the current account would go to deficit before the non-oil majority of the economy could increase their exports sufficiently and compete more effectively against imports. That is what will happen. As I pointed out in my earlier remarks, non-oil exports are expected to rise by 5½ per cent., almost twice the rate of the economy as a whole, and non-oil business investment is likely to rise about 3 per cent. in line with the rise in the economy as a whole. I am talking about a balanced growth, not one that is loaded particularly on to consumption, with consumption, investments and exports all going ahead.

Several Hon. Members: rose—

Mr. Speaker: Order. I have to bear in mind that there is to be a further statement after this one, and there is also to be an economic debate. I will allow questions to go on for a further 10 minutes on this matter, during which time I hope that each hon. Member who has risen will be called. Those who are seeking to take part in the subsequent debate might reserve their questions until then.

Mr. Eric Forth: I congratulate my right hon. Friend on achieving a remarkable balance between obtaining the responsible management of the economy that we have expected from the Government until now and acceding to the reasonable requests of those who wanted an element of greater expenditure. How does my right hon. Friend see the economic environment in the current year, particularly for the business sector, to which we look for the generation of wealth in the future and, indeed, of future employment?

Mr. Lawson: The continuing low inflation and the high company profitability which is enjoyed in the corporate sector—the highest for about 20 years—coupled with the benefit that the non-oil sector has enjoyed arising from

the adjustment of the exchange rate to the fall in oil prices, give British industry, and particularly British manufacturing industry, an unparalleled opportunity. I am sure they are capable of grasping that opportunity, and I hope they do so.

Mr. Reg Freeson: The Chancellor in his autumn statement, if I recall it correctly, expressed the hope for a reduction in unemployment from 1987. The Government actuarial figures, to which he referred, suggest an immediate increase in unemployment. In June or July this year, the Secretary of State for Employment forecast a reduction in unemployment by the end of this year. Can the Chancellor explain what these contradictory statements mean, if anything at all?

Mr. Lawson: The right hon. Member for Birmingham, Sparbrook (Mr. Hattersley) in his question about unemployment, correctly pointed out that the Government Actuary's figure was not a forecast but an assumption based on the current rate of unemployment. It is an assumption that has been adopted by Governments of both parties.

Mr. Michael Latham: So that this will be clearly understood by the local authority negotiators, will my right hon. Friend confirm that the increases in the education provision are intended to fund only the level of settlement suggested last week by my right hon. Friend the Secretary of State for Education and Science and not a penny more?

Mr. Lawson: Most certainly. The extremely generous settlement on teachers' pay which my right hon. Friend the Secretary of State for Education and Science announced is a decision. There is no question of any more being paid to the teachers than the substantial increases announced by my right hon. Friend. The total provision for the whole of the responsibilities of the Department of Education and Science — schools, universities and everything else has risen by £2¼ billion over the previous published plans.

Mr. Nigel Spearing: Since the junior health Minister declared at the Dispatch Box last Friday that she was more than happy with a 30 per cent. cut in non-emergency ambulance services in London, may we assume that none of the £300 million which the Chancellor has announced will go to restore those grievous cuts?

Mr. Lawson: Those are matters for my right hon. Friend the Secretary of State for Health and Social Services.

Mr. Neil Hamilton: Does my right hon. Friend think that the response to his autumn statement by the right hon. Member for Birmingham, Sparbrook (Mr. Hattersley) was rather dyspeptic, as though he had just, unusually, had to swallow something that he found disagreeable? The right hon. Gentleman referred to Government cuts, but is it not the case that, in every year since 1979, public spending has increased in real terms and that the statement, in effect, announced that that trend will continue? Does not my right hon. Friend foresee after the next general election our Government getting to grips with public spending and being able to make real reductions in it?

Mr. Lawson: There has been a steady improvement on the position that we inherited. Taking general


Government expenditure and deducting from it privatisation proceeds in order to obtain the steady underlying trend, public expenditure increased in real terms by about 3 per cent. a year, year in, year out, over the 10 years before 1978–79. That is why, as I said earlier, we got into the difficulties we did. During the first Parliament under the Government, we reduced that increase to 2¼ per cent. a year. During this Parliament, we have reduced it further to 1¾ per cent. a year so far. Over the three years to come, we plan to reduce it further to 1 per cent. a year.

Mr. A. E. P. Duffy: In his late and quite inadequate reference to unemployment, the Chancellor said that relief could only be prejudiced by high wage settlements, despite the virtual stagnation of private sector investment. Where in his statement can the Chancellor point to a single measure that might alleviate that upward pressure on interest rates which is preventing the revival of private sector investment?

Mr. Lawson: There is no stagnation of private sector investment. Private sector investment — I may have something to say about this in the following debate has risen in the upswing since the middle of 1981 faster than consumer spending. The forecast for 1987—this is the new fact which I have to tell the House—is for non-oil business investment to rise by about 3 per cent., or perhaps even a little more, fully in line with the growth of the economy as a whole. That is by no measure stagnation.

Mr. Nicholas Budgen: If monetary indicators are no longer a good guideline to over-heating in the economy, will my right hon. Friend tell us what factors in the economy are now a good guide to over-heating?

Mr. Lawson: Monetary indicators are very important. I urge my hon. Friend, because of his deep and abiding interest in this subject, to read carefully the lecture by the Governor of the Bank of England at Loughborough which went into the matter in immense detail and was very persuasive, explaining the difficulties in interpreting broad money aggregates. However, MO—the narrowest of the aggregates—does not suffer from these deficiencies. It will be easier to see whether that is on track. I am glad to say that it is.

Mr. Tony Banks: Is the Chancellor of the Exchequer aware that, next year, in the London borough of Newham the local authority will spend almost £3 million on bed and breakfast charges, whereas in 1984 it was spending only about £92,000? Will the right hon. Gentleman allow the London borough of Newham and the other local authorities to spend the almost £6 billion that is now in bank accounts, built up through the sale of council houses in capital receipts? If the right hon. Gentleman is not prepared to give that sanction, will he please explain how spending accumulated capital receipts affects the public sector borrowing requirement?

Mr. Lawson: It is clear that all public expenditure affects the public sector borrowing requirement, whether it is notionally financed out of accumulated receipts—which in practice may often have been spent anyway—or not.

Mr. John Butterfill: Does my right hon. Friend agree that by far the most disturbing aspect of his statement is the 9 per cent. overspend by local authorities? Will he join me in urging my colleagues who

represent shire counties to press upon county councillors the advice and the example given to them by business interests and to take independent advice on the management of their services with a view to obtaining reductions in costs?

Mr. Lawson: I agree with my hon. Friend. County councillors and, indeed, all councillors on important councils will be well-advised to do that.

Mr. Eric Deakins: Are the estimates of Britain's contribution to the EEC budget over the next three years based on a continuation of the maximum VAT rate at 1·4 per cent.? If so, is that not a very unwise assumption?

Mr. Lawson: The answer to the first question is yes. the answer to the second question is no.

Mr. Harry Greenway: What account has my right hon. Friend been able to take of the projected rate rise in many Labour-controlled councils, such as Ealing where rate increases of between 50 and 100 per cent. are expected next April after the Labour council has been one year in power? Is my right hon. Friend aware of the devastating effect that that will have on the local economy and on people's ability to pay their rates?

Mr. Lawson: I fully understand the problem to which my hon. Friend alludes. The practice of Labour councillors, cynically pushing up expenditure and the rates and not caring who gets hurt — whether it is the householders or the small business man—does immense damage. We have sought to limit that damage by the introduction of rate capping in a number of areas. That has protected the ratepayers in those areas, but in many areas that are not rate capped Labour councillors are able to do, and are doing, great damage.

Mr. Dennis Skinner: Is the Chancellor of the Exchequer aware that, if the BBC dared broadcast the truth about what he has had to say today, it might suggest that a pawnbroker stood up in the House of Commons, masquerading as the Chancellor of the Exchequer, surrounded by mountains of debts? It might suggest that that same man was handing out a few electoral bribes, never mentioning the fact that in seven years the credit card holders have become indebted to the tune of £27 billion and that the average family's debt as a proportion of real disposable income has gone up from 45 per cent. to 70 per cent. and that the Government borrowed $4 billion only seven weeks ago to bail out this failing economy and then, having finished what he had to say, having not mentioned anything about unemployment and the prospects for those people who are out of work he turned like a corkscrew and sat down next to the right hon. Lady who used to occupy the place called Grantham cafe, which has finished up as one of the 100,000 bankruptcies in Britain during the right hon. Gentleman's seven years' rule.

Mr. Lawson: Not even the BBC would be guilty of the hon. Gentleman's flight of fancy.

Mr. Edward Leigh: Following the question posed by my hon. Friend the Member for Bournemouth, West (Mr. Butterfill), will my right hon. Friend confirm that the £1·5 billion, or 10 per cent., increase in aggregate Exchequer grant should not be seen as an encouragement of profligacy in local


government? On the contrary, it should be seen as an encouragement for local government to emulate central Government in contracting out and in the privatisation of services — something that many local authorities, even Conservative ones, have signally hitherto failed to do.

Mr. Lawson: I agree with my hon. Friend about the desirability of local authorities' contracting out and privatisation. Unfortunately, an insufficient number have done so, but those that have pursued that policy have gained great benefit for their ratepayers and need to pursue it further. What we have decided by way of aggregate Exchequer grant is fully sufficient for the needs of local authorities in Britain. I hope that there will be no occasion for anybody to suggest otherwise.

Dr. Norman A. Godman: With regard to the increase in public expenditure which has just been announced by the right hon. Gentleman, how much will go to Scotland?

Mr. Lawson: I have not the precise figures in my head. The hon. Gentleman will know full well that public expenditure per head in Scotland is considerably higher than public expenditure per head in England.

Mr. Alan Howarth: Does my right hon. Friend accept that the increased public expenditure on education—provided it is tied, as the Government rightly insist that it must be, to copper-bottomed staff contracts and a rigorous squeeze on local authority extravagance— should be properly regarded not simply as an increase in current expenditure but something quantitatively different — an investment in the future productive capacity of the nation?

Mr. Lawson: I think that we have a chance, with the decision, and its ramifications, which my right hon. Friend the Secretary of State for Education and Science has announced, of achieving a much needed transformation in our education system. That will result in teachers becoming professionals once again—which they were in danger of ceasing to be—and will be of great benefit to children. It will also benefit the future of this country, both its economic and wider future.

Mr. Harry Cohen: Can the Chancellor explain why he did not mention interest rates in his statement, especially as they have just gone up again? Industry, public services and employers are dependent on these rates. What does he propose to do to bring the interest rate down below 10 per cent? Interest rates have never reached that level under this Government.

Mr. Lawson: Interest rates have been below 10 per cent. during this Parliament. The hon. Gentleman is misinformed.

Mr. Donald Dewar: The Chancellor said that he did not have the expenditure figures for Scotland in his head. As far as I can make out, looking at the papers in the Vote Office, they are not available there either.
Can the right hon. Gentleman explain why, in a statement which had an air of unreality about it, Scotland in particular has been treated in this unreal way? He will remember that normally there are separate figures for Scotland, Wales and Northern Ireland. This year there is a new beast — territorial and other Departments. That appears to cover Wales, Northern Ireland, Scotland certain parts of the Property Services Agency and Civil Service superannuation, which are linked in one aggregate figure. Can the Chancellor explain why this is so, and, having abolished Scotland in this rather cavalier and offhand way, will he guarantee that these aggregate figures are given at an early date and apologise to Scottish Members for this ludicrous situation in which it is impossible to get any impression of the impact of the statement in Scotland or the other parts of the United Kingdom to which I have referred?

Mr. Lawson: The hon. Gentleman really should not be so impatient. It was only today that the Cabinet agreed, as I announced, the public expenditure figures for the year. It is not customary for the House to be informed on the very day of the Cabinet decision. I thought that it would help the House if I did so on this occasion.
The figures for Scotland, Northern Ireland and Wales will be published in the normal way, in the printed autumn statement that will appear on Wednesday.

Helicopter Crash (Sumburgh)

The Secretary of State for Transport (Mr. John Moore): I am sorry to have to inform the House that at approximately 11.30 today, a Chinook helicopter belonging to British International Helicopters crashed into the sea approximately two miles east of Sumburgh in Shetland. The helicopter was inbound from the Brent field to Sumburgh with 47 people on board—three crew and 44 passengers. A coastguard helicopter which happened to be lifting off from Sumburgh airport at the time was at the scene of the accident almost immediately and recovered two survivors. The survivors were flown to Lerwick for treatment. A number of surface vessels, including the local lifeboat and helicopters, are now at the scene of the accident. No further survivors have so far been found. Eighteen bodies have been recovered. There will be a full investigation by my chief inspector of accidents. A team of investigators has already left for the scene of the accident, as has my hon. Friend the Under-Secretary of State who is responsible for aviation.
I know the House will join me in expressing its condolences to the bereaved and in commending the rescue services for their prompt action.

Mr. Peter Snape: Will the right hon. Gentleman accept the wish of the House to be associated with his condolences for the bereaved as a result of this appalling tragedy? I wish to be associated with his commendation of the rescue services. Does the right hon. Gentleman agree that accidents of this kind remind us that we still pay a high price in human terms for the successful exploitation of our North sea oil reserves?
Was any distress signal from the helicopter seen before the accident? Finally, will the right hon. Gentleman accept and pass on the sympathy of the House to those still awaiting news of people missing in this tragic accident?

Mr. Moore: I appreciate the hon. Gentleman's first and last points. I know the House shares his sentiments. The hon. Gentleman is right to pay tribute to those whose tenacity, courage and ingenuity have won for our nation such resources from the seas at such clear human cost. We owe them all a debt.
From the information which I have received, no warning signal was given.

Mr. David Howell: I also wish to be associated with the condolences to the bereaved which have been expressed at this horrific accident. I have travelled in a Chinook helicopter to the North sea rigs a good many times. I would appreciate any more information at this early stage about what exactly happened. My right hon. Friend will be aware that people in these usually safe vehicles wear wetsuits. If the helicopter has to ditch into the sea the passengers can usually survive for some considerable time. The appalling tragedy of the number of deaths in this case suggests that something very much worse happened — perhaps an explosion before the helicopter hit the water. Have there been any reports from witnesses at the scene?

Mr. Moore: I recognise what my right hon. Friend has to say and the experiences he gained during his time at the Energy Department, as I gained during my days there.
I have come to the House with all the information that I have at the moment. There was in fact—coincidentally — a coastguard helicopter which had lifted off from Sumburgh and which was at the scene almost instandtly.

Mr. Malcolm Bruce: I thank the Secretary of State for coming to the House so promptly to make a statement on what is an appalling catastrophe that many of us had feared might happen but hoped would not. Will he also accept our condolences from this Bench? I have spoken by telephone to my hon. Friend the Member for Orkney and Shetland (Mr. Wallace), in whose constituency this accident occurred. He is unable to be here due to a constituency engagement but was anxious to express his sympathies and condolences at this tragedy.
I have been advised that the helicopter was seen to fall out of the sky from a height of 500 ft and it broke on impact with the water. The bodies which have been removed from the water were wearing lifejackets, but these had not been inflated, indicating that there was no warning and that no distress signal was issued.
Will the Minister, to assure the many people who fly regularly, confirm that we will get a quick inquiry into the accident and a quick declaration of the cause? Is he prepared, if necessary, to ground other Chinooks? Regrettably, this is not the first time that such an incident has occurred to a Chinook. I am sure we will appreciate that there is concern among those who, as has been said, must fly to their work tomorrow. If the Minister can give that assurance, the House and the families concerned will be grateful.

Mr. Moore: I welcome the expression of condolences from the hon. Member who represents that part of the world. I have said as much as I can at this stage about the complete absence of warning. By coincidence, a coastguard helicopter was on the spot almost instantly. I cannot go into any more detail. The great benefit of the statutory and independent role of the chief inspector in my Department in instances such as these is that any information which calls for a change in conditions or safety arrangements can be recommended to the Civil Aviation Authority immediately, and even before the investigation is over. We ought to control any suggestions about safety until we have learnt a little more about the incident.

Mr. John Wilkinson: I also express my condolences. If the accident investigation branch of my right hon. Friend's Department requires additional resources, will my right hon. Friend call in the Royal Air Force directorate of flight safety, which has considerable operational experience of the military version of the aircraft?

Mr. Moore: My hon. Friend is right. If there is a need for additional resources, we will do that. Co-operation between the military and my Department is very close on these matters. As far as I can see, there is no need for additional resources at this stage, but proper investigation of the incident will not be impeded by a lack of resources.

Mr. Donald Stewart: May I associate myself and my hon. Friend the Member for Dundee, East (Mr. Wilson) with the sympathy that has been expressed? Does the Secretary of State agree that, in spite of this sad accident, we should keep in mind the splendid record of these machines on errands of mercy and life saving generally during the past few years?

Mr. Moore: I very much welcome the right hon. Gentleman's comments. I also want to be associated with his comments about the tremendous work that is done around our shores. I recognise the great safety record that we have so far enjoyed. We shall want to investigate this incident further.

Mr. David Harris: As, until today's appalling tragedy, the worst helicopter crash occurred in the Isles of Scilly, which are in my constituency, may I be associated with my right hon. Friend's expression of condolences? Although it seems from first reports that the circumstances of the two crashes are quite different and involve a different type of helicopter, will my right hon. Friend tell me, perhaps in writing, whether all the recommendations of the inquiry into the Isles of Scilly crash have been carried out?

Mr. Moore: I shall give my hon. Friend a precise answer and ensure that the information is given to the House. As a result of the Scilly Isles crash, the CAA had to improve standards and conditions for helicopter flying. If the present investigation makes further recommendations, the CAA will be advised and I trust that it will insist on the implementation of any new conditions.

Mr. Dick Douglas: Will the Secretary of State accept that, especially in Scottish Labour minds, this is a severe tragedy? In view of the record of oil companies— Shell is involved here— and the helicopter company and bearing in mind the remoteness of the Shetlands, can the right hon. Gentleman give us some idea of the facilities that have been offered to the next of kin to enable them to get to Sumburgh to alleviate some of the grief? Does he agree that the number of people who have apparently been killed is high, bearing in mind the safety provisions involved in such operations? Is that not most disturbing? Although we want an expeditious inquiry, we want a thorough inquiry into the nature and background of the Chinook and the relevant safety requirements.

Mr. Moore: I can give the hon. Gentleman the assurance for which he asks. There is no question but that this must be a most thorough investigation by my chief

inspector in the accident investigation branch. I should like to consider the hon. Gentleman's quite legitimate point about remoteness. We are aware of the difficulty of the distances involved. We must concern ourselves with the bereaved. I shall consider that matter with as much sympathy as I can.

Mr. David Heathcoat-Amory: If this tragic accident is found to be the result of a mechanical malfunction, does it not call into question the apparent preference of the British Army for Chinook helicopters rather than smaller British made helicopters as a means of transporting troops? Will my right hon. Friend ensure that the investigation includes Ministry of Defence personnel and that the results of it are fully disclosed?

Mr. Moore: I think it quite inappropriate for me to draw any further conclusions than the ones that I have already drawn with the information that I have now.

Mr. Robert Maclennan: I associate myself and my right hon. and hon. Friends with the expressions of sadness that we all feel at this appalling tragedy.
Although the right hon. Gentleman is right not to speculate about the causes of the accident, is he aware that those of us who have constituents who travel daily on such transport will want to know the inquiry's findings as soon as possible to end any possible speculation?

Mr. Moore: I fully understand the hon. Gentleman's point. I also understand the nature of activity in his constituency, having visited Dounreay. I shall make every effort to ensure that the House receives every possible piece of information. The most important thing is to ensure that there is a thorough investigation and to act upon its findings. We must do that first.

Mr. Michael McNair-Wilson: I also express my condolences. Does my right hon. Friend know whether the helicopter was carrying a flight recorder or a cockpit voice recorder?

Mr. Moore: I am sorry, but I cannot answer that question now. I shall let my hon. Friend and the rest of the House know the answer through a letter placed in the Library.

Master J. R. Bickford Smith

Mr. Speaker: I undertook yesterday to consider the point of order raised by the hon. Member for Hackney, South and Shoreditch (Mr. Sedgemore) about the Attorney-General's answer in last Tuesday's Hansard giving the results of an investigation into the allegations made by the hon. Member regarding the case of Tubero v. Toomey and others.
The hon. Member put to me three specific points. He asked first, whether it was not
a gross abuse of both Houses" — [Official Report, 5 November 1986; Vol. 103 c. 955.]
for the Lord Chancellor to have set up an inquiry into the hon. Member's allegations and then, without any reference to the hon. Member, to have announced the result of the inquiry in an answer given by the Attorney-General to a written question. To that point, I can only reply that since the hon. Member, as he himself said, asked the Lord Chancellor to set up an inquiry, it is for the Lord Chancellor to decide what form the inquiry should take and how its result should be announced. The Attorney-General, of course, answers for the Lord Chancellor in this House. As far as reference to the hon. Member is concerned, while that is a matter of courtesy between hon. Members and not a rule of the House, I hope it will always be observed.
In his second point, the hon. Member asked me whether it was proper to impugn the integrity of a Member by means of the question and answer procedure, instead of putting down a substantive motion for that purpose. In considering that point, I think it has to be borne in mind that last Tuesday's written answer summarised the results of an inquiry into the hon. Member's allegations. The answer consists largely of a rebuttal of those allegations. It also includes criticism of the hon. Member's conduct in presentation of his case. It is a long-established principle that criticism of a Member's conduct should be embodied in a substantive motion.
Finally, the hon. Member asks me to which Members of the judiciary the rule applies which requires reflection on conduct to be embodied in a substantive motion. The answer is set out in "Erskine May" at page 378, which specifies:
Judges of the superior courts of the United Kingdom, including persons holding the position of a judge, such as a judge in a court of bankruptcy and a county court, or a recorder.
I am satisfied that masters of the Supreme Court do not fall within this category.

The Attorney-General (Sir Michael Havers): I of course accept your ruling, Mr. Speaker, and apologise if, in my parliamentary answer, I went further than parliamentary convention allows. The substance of my answer was a complete rebuttal of the allegations, but I regret that the answer also reflected on the conduct of the hon. Member for Hackney, South and Shoreditch (Mr. Sedgemore) in an unparliamentary way.

BBC (Libel Action)

Mr. Neil Hamilton: On a point of order, Mr. Speaker. I apologise, after two long statements, for wearying the House, but this is an important matter which affects the privileges of the House.
You will know, Mr. Speaker, that the hon. Member for Workington (Mr. Campbell-Savours) has on many occasions recently sought to use the privilege of the House to call into question the conduct, or alleged conduct, of Mr. David Mitchell, an employee of Conservative Central Office, whom he has accused of having interfered with witnesses in a libel action, recently disposed of, which I had against the BBC. That is a serious criminal offence.
You will recall that on Tuesday the hon. Member for Workington announced, on a point of order, that he was sending a transcript of a tape recording of a conversation to my right hon. and learned Friend the Attorney-General. My right hon. and learned Friend yesterday wrote to the hon. Gentleman to say that in that tape recording he could find no evidence or material which would justify his asking the police to carry out an inquiry. He also sent that transcript to the Director of Public Prosecutions, who concurred with my right hon. and learned Friend's conclusion. I should like to ask whether it would be appropriate for the hon. Member for Workington, whom we all know to be a man of the highest integrity, to apologise now to Mr. David Mitchell for having made allegations about him for which there is no foundation?

Mr. D. N. Campbell-Savours: Further to that point of order, Mr. Speaker. I do not believe that the Attorney-General has given the matter his fullest consideration. For a start, the Attorney-General, during his reply, has pointedly refused to respond to any of the statements made by the parties to the transcript on interference with witnesses. At no stage in the reply does he refer to what they say. The fact that the transcript indicates, indeed states, in the words of one of the parties to the transcript, that a cover-up was organised by Conservative Central Office seems unimportant to him. He refuses to be drawn on that.
The fact that the transcript draws attention to the prospect of perjury by witnesses he treats as unimportant and refuses to be drawn on it. In his reply to me he does not refer to the fact that the transcript points to the changing of stories by witnesses and hon. Members, arid to pressure being exerted by Mr. David Mitchell. The fact that potential witnesses were frightened by the prospect of being identified and their names published in national newspapers and were modifying their evidence to avoid embarrassment seems unimportant to him. It is all in the transcript and he refuses to be drawn on it.
It is absurd for anyone to suggest that the evidence as submitted did not warrant an inquiry by the police. The Attorney-General, who refuses to be drawn on the matter of political pressure over the Westland leak, is the same man who today refuses to be drawn on the question of political pressure on witnesses to the BBC trial. No one should believe what is being said by the Attorney-General.

Mr. Speaker: I cannot see any point of order that arises for me in this. I have not heard the tape. It is not a matter of order; it is very much a matter for debate.

Mr. Gerald Howarth: On a point of order, Mr. Speaker. I believe that there is a point of order here. The right hon. Member for Swansea, West (Mr. Williams), who is in the Chamber, suggested on 27 October that the hon. Member for Workington (Mr. Campbell-Savours) would have said, had you not cut him short, that as many as 17 out of 20 witnesses may have been persuaded to withdraw.

Mr. Speaker: Order. We cannot get into a debate on this. Will the hon. Gentleman come to a point of order which I can seek to answer?

Mr. Howarth: Is it in order for hon. Members who have been cleared by the Attorney-General to be mentioned in that way? Is it not incumbent upon the hon. Member for Workington to name those people and place the transcript in the Library, so that we can all see it?

Mr. Speaker: I think that we have dealt with that matter. [Interruption.] Order. The hon. Member for Bolsover (Mr. Skinner) is not even in the Chamber.

Mr. Dennis Skinner: I am, just.

Mr. Speaker: Well, stay there. I think that we dealt with this matter on Tuesday. I cannot see any point of order for me.

Mr. Michael Brown: On a separate point of order, Mr. Speaker. In view of the fact that the hon. Member for Workington (Mr. Campbell-Savours), under the cloak of privilege, has been able to make certain challenges to the answers given by the Attorney-General and the Director of Public Prosecutions, may I ask you to rule that the hon. Gentleman should place the tapes to which he is referring in the Library of the House?

Mr. Speaker: That is not a matter for me. The tapes are not an official document.

Mr. Campbell-Savours: I would be more than happy if the Attorney-General would use the power and the right that he has, and which I do not have, to place that transcript, under the cover of privilege, in the Library. I ask him to do so.

Animal Liberation Front

Mr. Colin Shepherd: I beg to ask leave to move the Adjournment of the House under Standing Order No. 10 for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
the distribution of a booklet correlating Animal Liberation Front activities and containing instructions on how to make incendiary devices and fire bombs.
Two days ago an animal rights campaigner in Herefordshire let it be known that he was deeply concerned and disgusted at a leaflet and booklet that he had received through the post. I now have a copy of that sinister booklet and I am appalled by its content. The content is a wide incitement to action to cause damage. Most important is the explicitly detailed instruction on how to make incendiary devices and how to use them to maximum effect.
Regardless of the views that hon. Members may hold on the complicated and knotty issues of animal welfare and rights, I am sure that all hon. Members have a serious interest in the safety of their constituents and in the general rule of law. The fact that a leaflet is being freely distributed across the country at this time which gives such explicit details of how to assemble incendiary devices from everyday household materials, and how to plant them for greatest effect, must surely be a matter of immediate concern to the House. The fact that it is being widely distributed, as it claims, is even more worrisome, since it will inevitably become of interest to a wider readership than simply those interested in animal rights, who could be disposed towards mischief, innocent or otherwise, with injury or loss of life resulting. That underlines the seriousness and urgency of the matter.
I hope that peaceful recipients of this anonymous publication will waste no time in burning the copies sent to them, or will let their views be known to the publisher, if they know who it is. The House should be given an early opportunity to express its revulsion at such tactics and to discharge its duty to alert the public to a threat to public order which is being built up as a consequence of this irresponsible and reprehensible course of action from extremists, whoever they are.

Mr. Speaker: The hon. Member for Hereford (Mr. Shepherd) asks leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that he thinks should have urgent consideration, namely,
the distribution of a booklet correlating Animal Liberation Front activities and containing instructions on how to make incendiary devices and fire bombs.
I have listened with great care to what the hon. Gentleman has said. I regret that I do not consider that the matter he has raised is appropriate for discussion under Standing Order No. 10 and I cannot, therefore, submit his application to the House. However, I hope that he find other ways to bring this important matter before the Chamber.

Opposition Day

20TH ALLOTTED DAY

Economic Policy

Mr. Speaker: Before I call the Opposition Front Bench .spokesman to move the motion, I must announce that I have selected the amendment in the name of the Prime Minister and that I shall introduce the ten minutes limit on speeches between 7 o'clock and 9 o'clock.

Mr. Roy Hattersley: I beg to move,
That this House condemns the Government's continued operation of economic policies which produce intolerable levels of unemployment, prohibitive interest rates, cuts in public sector capital spending, the destruction of the nation's manufacturing base and a serious loss of the British share in world trade; and calls upon the Government to accept that its economic strategy has failed and to replace it with policies for the real economy which promote investment, growth, employment and exports.
Anyone who heard today's autumn statement will agree that the Government are certainly not steering the same course as last year. Indeed, they are steering no steady course at all. Part of the reason for the swerving and skidding is the ambiguity over the medium-term financial strategy. Were the Chancellor not operating his normal levels of courtesy, which make it obligatory for him never to be here when a debate begins, I would direct questions to him specifically on that subject. As it is, the Chief Secretary to the Treasury will no doubt whisper in his ear when he condescends to arrive.

The Chief Secretary to the Treasury (Mr. John MacGregor): In all fairness, the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) will recall that he was not here throughout the whole of Treasury questions this afternoon. I shall make clear and careful notes of what the right hon. Gentleman says. My right hon. Friend the Chancellor will be here shortly.

Mr. Hattersley: No one except the Chief Secretary would regard there as being anything like a parallel between those cases. It is clear that the Chancellor is not here, and in his absence I shall ask a number of questions about the medium-term financial strategy, of which the Chancellor is the only true begetter and author, and for which he must take responsibility.
The Chancellor insists that the medium-term financial strategy is still in place. I do not believe that that view is accepted anywhere outside the House, nor do I believe that it is accepted by the Chancellor in truth or in honesty. The medium-term financial strategy has either been mortally wounded, or is dead, and so it should be. The strategy is built around the implicit faith that rigorous fiscal and monetary policies will inevitably lead to solutions of the problems of the real economy. That is clearly not so. Even if we are to believe — and it will stretch credulity to breaking point—that the strategy remains, and even if the Chancellor repudiates the Governor of the Bank of England's view on broad money, it is clear that the MTFS has failed and that the economic recovery which it was claimed would automatically be brought about by that strategy's application has not come about and will not

come about until there is a change of policies. The effects of the failure cannot honestly be denied, although I have no doubt that the Chancellor will attempt to deny them.
I should like to begin with four examples. Much of Government policy for almost eight years has been designed to hold down interest rates, yet today real interest rates are not only the highest in our history, but are the highest in the industrialised world. The balance of payments, which Government policy proposed to bring into a full year's surplus of £3·5 billion, has slumped into deficit. Indeed, in seven years the Government have converted a surplus of £4 million in the manufacturing account into a £4 billion deficit.
Employment in this country, which the Government claim to have increased—indeed, in the amendment that we are to debate, still claim to have increased — has actually fallen by 1,207,000 since 1979. The Government will have to learn to live with the fact that many of us recall that the Government were elected in 1979, and we are not prepared to start counting their achievements over the past three years alone.
I notice that the Chancellor has just entered the Chamber. I shall give way to him if he wants to apologise for his absence.

The Chancellor of the Exchequer (Mr. Nigel Lawson): I was absent for the first few minutes of the right hon. Gentleman's speech — which I regret — for exactly the same reason as he was absent through all of Treasury questions, although he has not expressed any regret for that. This is a rather busy day.

Mr. Hattersley: I was absent from the Chamber during Treasury questions because I was reading the Chancellor's autumn statement. I had hoped that the Chancellor would deliver it before 4.30 this afternoon.
I was describing some of the Government's failures. I had dealt with interest rates and was talking about the bogus claims that the Chancellor and his colleagues have made about employment. I repeat for the Chancellor's benefit that employment in this country has actually fallen by 1,207,000 since 1979. Indeed, in Britain over the past seven years we have lost more jobs than the rest of the EEC countries combined. We have lost more than 2 million full-time jobs. We have lost 11,000 jobs in the last quarter, arid 114,000 jobs in manufacturing industry in the year to August 1986.
The figures for men and women actually in work, catastrophic though they are, are the figures which the Government attempt to use as a diversion from their unemployment record. On an honest calculation of unemployment—the calculation which the Government inherited — unemployment now stands at almost 4 million. On the Government's own massaged figures it is 3,333,000. On the Government's own initially secret forecast it will be 3,100,000 at the beginning of the next decade. Indeed, we heard from the Chancellor this afternoon that the Government Actuary's report has increased the assumption on unemployment since the report was published last year.
If, in 1979, the BBC had predicted that the result of seven years of Conservative government would be record unemployment, record real interest rates, a collapsing balance of payments and a net job loss of 2 million, the chairman of the Conservative party would have accused it of Bolshevik bias.
The charge sheet is very much longer than that. It includes a record number of company liquidations, the highest total tax bill in British history and the lowest value for sterling ever. The charge sheet is well known in this country, and so is the plea of mitigation. The Government say, and the Chancellor said again this afternoon, that they have done very well on inflation. The Government inherited a retail prices index of 10·3 per cent. They doubled that, largely by a massive increase in value added tax. Then, at a terrible cost to jobs, output and public services, the RPI came down to 3 per cent., although it is now rising again.
In June the Chancellor said:
our rate of inflation is, if anything, below the European Community average".—[Official Report, 3 June 1986; Vol. 98, c. 758.]
That is a wonderful example of the power of selection that the Chancellor has over statistics. I concede at once how perfectly true that is and that we are doing better than Spain and Greece. However, if we compare the British record with that of other industrialised countries, which are a fair comparison, we find that the picture is very different.
I should like to quote some figures from British Business, the Government's own publication. It shows that inflation is 3 per cent. in the United Kingdom, 2 per cent. in France, 1·6 per cent. in America, 0·8 per cent. in Belgium, 0·1 per cent. in Japan, and in Germany minus 0·4 per cent.

Mr. Michael Latham: As the right hon. Gentleman is talking about records, will he remind us when between 1974 and 1979 inflation stood at 3 per cent.?

Mr. Hattersley: The hon. Gentleman knows the answer. Let me give him the other parallel. If he were to compare inflation in Britain with that in the rest of Europe, he would find that it is in no way to the Labour Government's discredit when compared with this Government's record.

Mr. Lawson: Yes, it is.

Mr. Hattersley: The Chancellor says that it is. He will have the opportunity to quote the figures in a moment.
The truth is that, despite the reduction in oil prices and the other factors that have come to the Government's aid, the achievements of which the Government boast are relatively poor compared with what has happened in the EEC. While that part of the Government's record is relatively poor, the rest of the Government's record is absolutely castastrophic. The Government's failure is the Chancellor's personal failure. He is the author of the medium-term financial strategy and the inventor of the nominal targets, and it is the pursuit of those targets which has devastated the real economy.
I know very well that the Chancellor's response will be to defend himself with selective statistics, false comparisons and bogus forecasts. The time has come to deal with some of the sleight of hand in which the Chancellor specialises from debate to debate. The obvious example is that we are told that output in this country is at its highest level in history. So it is, but all that that means is that we are no longer doing worse than we were on the day that the Conservatives were elected. For some years we were doing worse than on election day.
Although we are no longer doing worse than on the day that the Prime Minister entered No. 10 Downing street, we are still doing spectacularly badly. Since 1979 the economy has expanded at an annual average of 1·4 per cent. In the previous 30 years the figure was 2·6 per cent. If the Chancellor, or the hon. Member for Rutland and Melton (Mr. Latham), wants to ask what the figure was during the Labour Government, let me tell them that it was 1·8 per cent. over the entire period that we were in office— a great deal better than the Government's record since the election.
The Chancellor tells us, too, that exports are at a record level. We are not told that a combination of expanding world trade and a boom in consumer spending has caused imports to rise at an even faster rate. We are not told that we are losing our share of world trade while increasing the volume and value of our imports. The fact is that, in those areas, the Chancellor never tells us the whole truth when it is convenient for him, particularly with regard to trade exports and imports, because to give a truthful account of our balance of payments record would be to expose the cynicism of the Government's policy. We are facing a consumer-led balance of payments crisis. The Chancellor's response to that is to attempt to buy votes by cutting taxes, as I have not the slightest doubt he will in next year's Budget.

Mr. William Cash: Will the right hon. Gentleman be more truthful with the House on the matter and agree that one reason for the high level of imports is the lack of quality in British industry? That quality will not be achieved by the prescriptions that he has been putting forward to the British nation over the past two years.

Mr. Hattersley: I do not believe that for a minute. The reason for our record being as bad as I have described is the attack on our manufacturing base, which has been central to the Government's economic policy. More important in that context, the reasons are debatable between us; the facts are not. I only wish that the Chancellor would tell us the facts rather than put the invariable gloss on the truth, which is his stock in trade.
I have no doubt that the Chancellor will deny many of those things when he speaks, so I should like to pause for a moment to evaluate the worth of his denials. On 9 October, on Channel 4 news, he was accused of dodging the issue of exchange rates in his conference speech. I have listened to this with great pleasure several times during the past day. The right hon. Gentleman defended himself by saying that he would deal with the subject in his Mansion house speech in seven days' time. He did not say a word on the subject. However, he dealt with the balance of trade, describing the August trade figures as a freak. What impression did he intend to give by describing them as a freak? Did he mean to suggest that the September figures, about which he must have known something by then—a deficit of £277 million—should be regarded as normal, or was he trying to convey the impression that the balance of trade and the balance of payments were moving into surplus? The truth is that the Chancellor will say anything to get out of a corner. Trapped in a sinking ship, he always throws his integrity overboard, and we hear the splash almost at once.
The Chancellor has similarly played for time with the economy, and he has been rumbled. Capital assets are sold off to finance brief tax reductions. Oil has briefly filled the


hole blown in the economy by the collapse of manufacturing industry and the collapse brought on by the pursuit of the arbitrary medium-term financial strategy targets.
In both cases the Government have taken refuge in the most temporary of expedients, for North sea oil is running out, and every time the markets catch a glimpse of what, on present policies, the British economy will be when the oil has gone, they withdraw their confidence from the British economy. That is because the Chancellor has managed to make us peculiarly dependent on the 6 per cent. of gross domestic product that oil provides. I should think—indeed, I feel certain—that there can be no other industrialised country in the world where the Finance Minister would go to Parliament and offer as one of his excuses for failure the reduction in costs inherent in the reduction in oil prices.
As the Chancellor made clear today, that has become one of the reasons why things are not operating in the way that he would choose. Had he used seven years of oil revenues to build up our industrial base, that reduction would have been an unprecedented boom, but, tragically, we are particularly vulnerable to fluctuations in oil revenues because of that dependence, because of the way that the Chancellor has chosen to lean upon them. Because of our tragic dependence, he has made sterling particularly vulnerable to changes in market valuation of our future prospects.
The most desperate example of that was the depreciation of the pound to $1.06 in March 1985. The most recent example was in August this year, when the markets discovered that even with oil we were in massive trade deficit.
The House will recall that the Chancellor told us at the time of the Budget that the reductions that were brought about by the fall in oil prices and oil revenues
should not cause us undue concern."—[Official Report, 18 March 1986; Vol. 94, c. 168.]
During the Budget debate the right hon. Gentleman's complacency either rose to new heights or sank to new depths, depending on how complacency is evaluated. He said that, having lost half the value of oil in 25 weeks and survived, we could easily accommodate losing the rest over the next 25 years. I hope that he recalls what has happened since he told us that all was well, that everything was on course, that the economy was moving in the direction that he chose, and that we should not concern ourselves with the change in oil prices. Since then the balance of payments, which at that time was forecast to produce a £5 billion surplus, has moved into deficit. The best that the Chancellor can say about it now is that it will break even, as distinct from the surplus of £5 billion.
Interest rates have gone up again. The Chancellor still shrugs off increases in interest rates—that is, when they are not likely to take place during the Conservative party conference—but as a result of his attitude towards those matters, and as a result of the market's judgment about the economy when the oil runs out and the discovery of our true trade position, and despite the massive intervention in which he was involved in October, the pound still required an increase in interest rates, which inevitably caused enormous damage to investment prospects and enormous hardship to home owners.

Mr. John Maples: In what way does the right hon. Gentleman think that the policies that he has proposed would have reduced interest rates to the level of those of some of our industrial competitors?

Mr. Hattersley: The straight answer to the question is that the repatriation of funds recently invested overseas will produce an upward pressure on sterling and make it unnecessary to run record interest rates in the way in which the Chancellor has done it.
Having answered the question, let me tell the hon. Gentleman—[Interruption.]—and his colleagues that we chose this debate so that we could talk about the Government's policy. The Chancellor emphasised that by deciding to make his autumn statement today. Now and in future debates neither the hon. Gentleman nor the Chancellor will run away from the consequences of the past seven years by trying to divert attention to other things.

Mr. Nicholas Budgen: Will the right hon. Gentleman give way?

Mr. Hattersley: I shall not give way.
I was going to mention the intervention in October and say that the Chancellor, having spent seven or eight days encouraging and supporting that proposal and that attitude, was still driven to the increase in interest rates, with enormous damage to the economy, as well as the loss of the funds that were used for intervention. I suppose that it made it possible for the Conservative party to end its conference on a happy note. It made the Prime Minister participate in not only the longest ovation in political history, but the most expensive.
Although the inevitable was postponed for a week or so, the cycle of long-term collapse continued. Interest rates went up, and manufacturing industry was damaged again. That damage meant that the economy went into further decline. It meant an emphasis on, and acceleration and continuation of, the trends since 1979. It meant less investment than in 1979, less output than in 1979, and a further erosion of the manufacturing base on which our economy is so dependent. Inevitably, the result has been another bad balance of payments performance and another sterling crisis, and the whole damaging process is repeated again and again. The only question is how soon the cycle will once again come round.
In a moment or two the Chancellor will, as is his way, reject all the blame, deny every allegation and reject all criticism. However, he will do so with less than complete conviction, because if he really believed in his own innocence he would not spend so much time tampering with the evidence. I offer him the chance to make his defence more plausible than it has been during the last four years. I shall do so by asking him five specific questions about what he has produced, what the medium-term financial strategy, for which he is responsible, has produced and what the Government have produced since 1979.
My first question concerns unemployment. I shall make it as easy as I can for him to answer this question, knowing his pathetic reluctance to answer questions on unemployment. For a moment, I suppose wrongly and irrationally, I overlook the 18 statistical changes that have been introduced to reduce the total of the registered unemployed. I overlook the new tests and targets that have been introduced this week to squeeze unemployed men


and women off the register. I overlook even the special schemes, measures and projects introduced for the same purpose—the artificial jobs which the Prime Minister condemned during the 1979 election campaign. Allowing for all the Government's statistical figures, for all the bullying to take men and women off the register and for the schemes which are not real jobs, will unemployment be down to 3 million at the next general election?

Mr. Patrick Nicholls: rose—

Mr. Hattersley: I am sure the Chancellor will recall that the chairman of the Conservative party said—ironically, on BBC television—that if the Government were unable to bring unemployment down to 3 million by the next election they would not be worth re-electing. Will the Chancellor and his colleagues be worth re-electing on polling day? Even on the Chancellor's phoney figures, will the unemployment figure be 3 million by that date?
Secondly, the labour force has fallen by 1·2 million and 2 million full-time jobs have been lost. When will the number of jobs in the economy be back to its 1979 level? That has nothing to do with the demographic change to which the Prime Minister constantly refers, and nothing to do with the fact that, as the Prime Minister prays in aid, more women are entering the labour market.
Thirdly, when will real interest rates, now about 8 per cent., fall to their 1979 level? From experience, I know that the Chancellor usually claims that high real interest rates are the result of his success. His claim enables us to measure the recklessness with which he replies to such questions. He claims that high real interest rates are the product of low inflation.
If the right hon. Gentleman is going to make that claim today and say that the only reason why real interest rates in this country remain at about 8 per cent., I should like him to answer another question. When will real interest rates in Britain be as low as those in comparable countries where inflation is even lower than ours? I gave the Chancellor a list of the countries with better inflation records than our own, and in most cases their real interest rates are lower than ours. When will we aspire to, let alone achieve, the success of our OECD and EEC competitors in either of those regards?
Fourthly, may we hear more about the August balance of payments "freak"? I agree with the Chancellor that one record catastrophic month proves nothing. That catastrophic month was followed by a bad month. In themselves, two months of pretty grim figures may not prove anything. So, what will the Chancellor tell us about the year from August, the year from that freak figure to next August? Will it be in surplus, or in deficit?
Finally, what are the prospects for manufacturing industry? Since 1979, manufacturing output has fallen by 7·5 per cent., manufacturing investment has fallen by 17 per cent., and the manufacturing balance of trade has shifted from a £4 billion surplus to a £4 billion deficit. Under existing policies, will manufacturing output, investment and trade ever return to the 1979 position?
I have to confess that to a degree each of those questions is rhetorical. Anybody who has listened to the Chancellor in the House, or elsewhere, knows that the chances of his even essaying an honest answer are negligible. In the light of that, I want to ask the Prime

Minister a question, in her absence, about what I hope will become her most notorious statement during the general election campaign of 1979.
On 19 April 1979, at an election rally in Birmingham, the Prime Minister promised to cut unemployment and described how that would be achieved. We are, she said,
going to do it by creating the conditions for real jobs, not artificial ones, so that once again the products stream from our factories and workshops whilst the customers of the world scramble over each other to buy them.
The right hon. Lady has done the exact opposite. Unemployment has risen by 2 million, the register has been reduced by artificial jobs and arbitrary disqualifications, factories and workshops have been starved of investment and have gone into liquidation in record numbers and the salesmen of the world fall over themselves to sell their goods in our markets.
It is a big claim, but even the Prime Minister has never made a more cynical promise, nor broken her word more consistently and cynically. I make it absolutely clear that my hon. Friends and I will vote tonight against the cynicism and deception that are an integral part of Tory economic policy, as well as against the Government's obvious failure.

The Chancellor of the Exchequer (Mr. Nigel Lawson): I beg to move, to leave out from "House" to the end of the Question and to add instead thereof:
congratulates Her Majesty's Government on the success of its economic policies, which have brought inflation down to its lowest levels for two decades, combined with sustained economic growth, a million new jobs created since 1983, steadily rising living standards, and record levels of investment.'.
The last part of the speech of the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) was even more extraordinary than usual. He not only claimed that the result of the 1979 election was a foul, but seemed totally oblivious of the fact that the British people had an opportunity in 1983 to record their own verdict, not his verdict, on the Government's economic performance and returned us with an increased majority.
In my statement earlier this afternoon, I set out the prospects for the economy over the next year. It is above all a prospect of yet another year of the steady progress that we have seen over the past five years, with healthy economic growth, inflation at low levels, and 1 million new jobs created since 1983.

Mr. Hattersley: I spoke for 28 minutes and that was not half enough to get the truth out of the Chancellor. He has given us the figure of new jobs since 1983. Will he now give us the figure of job losses since the Government were elected?

Mr. Lawson: I shall make my speech in my own way. It really is no use refighting the 1983 election. The country gave its verdict on our performance between 1979 and 1983. That is over and done with. We are now talking about what has happened since we were re-elected in 1983 and since then there are very nearly I million more jobs. That is a fact.
That steady progress is something that we have come to take so much for granted on both sides of the House that it now seems almost routine. The only questions that we ask ourselves are whether growth will be, say, 2·5 per cent. or 3 per cent., or whether inflation will be, say, 3 per cent. or 4 per cent.
Yet, when one thinks about it, this is a pretty remarkable turnround. Not so long ago, we used to debate whether Britain could have sustained growth without a sharp and damaging increase in inflation. The 364 economists were not the only people who said that it was completely impossible. Well, we have put an end to that argument and it is one debate that has been decisively won. It has been won by the Government sticking to their guns. But if ever there was a year in which that has been tested, this is it. The dominant event has clearly been the collapse of the oil price—halving from almost $30 a barrel at the time of last year's autumn statement to around $14 a barrel today.
There were those who would have said, a year ago, that this halving of the oil price would wreak enormous damage to the British economy, and many did so. That is another argument which has been decisively won. Earlier this year, there were some who gambled that pressure on sterling, combined with the loss of our oil revenues, would cause us to abandon the free market policies which have made our North sea oil industry the success it has been. The Opposition, as short sighted as ever—the hon. Member for Thurrock (Dr. McDonald) will well remember this—urged us to do so. Yet is there anyone now, at home or abroad, who doubts our resolve to keep the North sea free? I very much doubt it.
What has happened to the United Kingdom economy in a year when we have lost more than half of our oil revenues and half of the value of our oil exports? As I explained earlier this afternoon, public borrowing remains on track, despite the fact that oil revenues this year are set to be no less than £6½ billion lower than last year. Despite that, the PSBR is on track. To have weathered a revenue loss of this magnitude is a remarkable achievement. The reason we have been able to weather it, and the impact of the oil price fall generally, is the underlying strength and resilience of the British economy as a whole, coupled with the prudence of the Government's financial policy.
Domestic demand has been growing steadily, and the forecast for this year as a whole is a rise of 3½ per cent. over last year, with consumer spending particularly strong. Some of the commentators and some Labour Members have woken up to that a bit belatedly and with something of a start.
When I said in May that we were seeing a pause in economic activity but that I expected it to be short, the conventional wisdom, and certainly the view on the Labour Benches, was that the pause was not a pause but a halt, that the economy was underperforming and in danger of grinding to a stop. That was what was said as recently as May this year. Now that the extra spending power to which I pointed then is feeding through into demand, in much the way that I expected, the conventional wisdom on the Labour Benches has changed tack. Suddenly I am told that the economy is overheating—

Mr. Mark Fisher: Sucking in imports.

Mr. Lawson: —with a consumer boom destined to do nothing but, in the startlingly original words of the hon. Gentleman suck in imports.
As usual the Opposition do not know which horse to back. One moment they tell us that the economy is flat on its back, and the next moment they say that we are engineering an irresponsible pre-election boom. Indeed,

the hon. Member for Thurrock has written to me suggesting that I am engineering what she called a "postelection boom"—that is precisely what she wrote. They clearly do not know whether they are coming or going.
I can, of course, fully understand why they are so worried about the next election, whenever that may be. But the plain fact is that demand at home is growing very much as I expected at the time of the Budget, and as I reiterated in May. Indeed, its growth has been remarkably steady.
What has fallen short, it is true, has been this year's growth in exports, largely because of the worldwide slowdown in trade earlier this year, and the cut-back in spending by OPEC and other primary producers. But that has only reduced our overall growth rate this year from about the 3 per cent. that I forecast in the Budget to the 2½ per cent. that I now expect. Looking ahead to next year, there is every reason to expect demand at home to go on rising steadily while our export performance picks up again. The outlook for exports is very encouraging.

Mr. Hattersley: The Chancellor makes a typical point about the fall-off in our exports and world trends. Why have we lost a disproportionate share compared with similar countries?

Mr. Lawson: The right hon. Gentleman is, as usual, completely wrong. He is so concerned about manufacturing. The only accurate figures that we have are for manufacturing trade. Manufacturing exports' share of world trade has been steady; if anything, it is rising slightly. It has certainly been steady for the past five years, whereas under the previous Labour Government it was steadily falling, year in, year out. There has been a remarkable change in trade.
As I was saying, the outlook for exports is encouraging. The recent CBI quarterly survey shows that companies themselves are a good deal more optimistic about export prospects than they were earlier in the year. Non-oil exports have resumed a vigorous growth and stand at an all-time high. The right hon. Gentleman once again made much of the difficulties of the manufacturing sector, but just as the fall in exports had a particularly marked impact on manufacturing companies, so the pick-up will be of particular benefit to manufacturers.
The signs are encouraging. In the third quarter of 1986, exports of manufactures were some 3 per cent. higher in real terms than in the first half of the year. World trade in manufactured goods is likely to grow more rapidly in 1987, and I am confident that British exporters will seize the opportunities open to them. Over the past five years, British manufacturing exports have succeeded in maintaining their share of world markets — a success unprecedented in recent history, and in sharp contrast to the marked fall under the previous Government.

Mr. Hattersley: rose—

Mr. Lawson: I shall give way in a moment.
The competitive position of the non-oil economy has been improved by the necessary adjustment of the exchange rate to the oil price collapse. A continuous fall in the exchange rate would simply mean ever higher inflation, and that is something no one wants, and to which this Government are resolutely opposed.
The plain fact is that the pound is now highly competitive.

Mr. Hattersley: The right hon. Gentleman made a number of claims about world trade and our share of it. Will he give the honest accurate figures now, will he ask the Chief Secretary to give them, or shall I give them instead?

Mr. Lawson: The figures for our volume share of world trade are contained in the printed version of the autumn statement and they will show precisely what I said a few moments ago.
I said in my statement earlier today that in the short term the current account of the balance of payments, to which the right hon. Gentleman alluded, is expected to go into a deficit of some £1½ billion next year— after, incidentally, a cumulative surplus of £21 billion over the past six years, compared with a cumulative deficit of about £5 billion under the previous Labour Government.
But we have now had a major improvement in cost competitiveness. As the full benefits feed through, the current account deficit should steadily diminish. Overall, non-oil exports are forecast to rise next year by 5½ per cent., continuing the present strong upward trend. The London Business School is forecasting an even stronger recovery in exports, particularly in manufacturing. This more than offsets some slowdown in consumer spending, while investment continues to rise broadly in line with the economy as a whole.
Looking at the overall position, the prospect for next year is for faster growth that is balanced in two senses: first, between domestic demand and exports; and, secondly, between investment and consumer spending. I have to say that the latter achievement was conspicuously lacking in the upswing that took place under the previous Government. Between 1975 and 1979 under Labour—[Interruption]—know that the right hon. Member for Sparkbrook does not like listening to this, but he will have to. Between 1975 and 1979, under Labour, consumer expenditure grew twice as fast as investment, whereas over the period since 1981—which is a much longer upswing, incidentally, and one which is still continuing —investment has gone up by an average of over 4 per cent. a year and consumer spending by less than 3 per cent.
Of course there remains deep concern on both sides of the House about the continuing high level of unemployment. The number of jobs has substantially increased—by 1 million since 1983, more than in the rest of the European Community put together. Total employment has now risen for 13 successive quarters—the longest period of uninterupted growth in employment for almost 30 years. Opposition Members ought to welcome that if they have any concern at all for the unemployed, which they have not. They seek to exploit the unemployed for their own party political purposes. They simply do not care.—[Interruption.]
Here, too, there are signs that the outlook is more promising. Last month's figures show unemployment at the same level as six months previously, and the highest number of registered job vacancies for seven years. But the key to continuing and accelerating the growth in the number of jobs is a more efficient and competitive economy. Next year's faster growth means that the outlook for jobs should be more promising, provided always that pay settlements are at a level that can be afforded.
The right hon. Member for Sparkbrook spent a long time talking about the decline of the manufacturing sector.

The picture, inevitably, is not nearly as uniform as he implied: in certain industries, mostly the metal-using industries, output certainly is still below the pre-recession peak. But in others, such as chemicals, food, and electrical engineering, it is well above the levels of 1979.
I do not, of course, dispute that manufacturing output altogether has fallen slightly under this Government, just as it did when Labour was in office. Indeed, given the forecast of 4 per cent. growth in manufacturing output for next year, the overall fall under this Government will be, if anything, less than under Labour. But there is this critical difference: manufacturing productivity has grown almost three times as fast since 1979 as it did under Labour. Partly as a result, manufacturing profitability is at its highest level since 1973.
Nor, of course, is it right to overlook the non-manufacturing side of the economy — which, after all, accounts for some three quarters of total national output. In looking at the overall picture, it is interesting to compare the six years from 1973 to 1979, dominated by the Labour Government, with the period since, when we have been in office. Overall output growth has been similar, though slightly higher since 1979, up by an average of 1½ per cent. a year compared with 1¼ per cent. a year under Labour. But what is significant is that most of the growth under Labour was simply attributable to North sea oil. Excluding oil, output went up by an average of only ½ per cent. a year between 1973 and 1979 compared with 1¼ per cent. a year since.

Mr. Hattersley: rose—

Mr. John Prescott: Why use the 1973 figure?

Mr. Lawson: That was the last year before the Labour Government took office. That was the base. The right hon. Member for Sparkbrook asked me about the comparison between inflation in this country and inflation in the Community as a whole. During the entire period of the Labour Government, inflation in Britain averaged 4½ per cent. more than inflation in the Community as a whole. Throughout the time that we have been in office, inflation has averaged the same as in the Community as a whole and, indeed, is now below it. Not only has our absolute performance on inflation improved but so has our relative performance.

Mr. Hattersley: I am fascinated once more by the right hon. Gentleman's technique. Having chided me for constantly choosing periods going back beyond 1983, why has he suddenly started to make statistical comparisons with periods going back to 1979 and 1974? Is he not doing what he always does—just choosing whatever arbitrary period produces a bogus figure?

Mr. Lawson: That year is the obvious base. As the Labour Government came into office in March 1974, they inherited the 1973 position. The right hon. Gentleman also suggested that we had now abandoned both fiscal and monetary policies. I explained to the House earlier today that fiscal policy remains firmly on track in spite of the £6½ billion fall in oil revenues compared with last year. We have achieved a continuing reduction in public expenditure as a percentage of GDP, whether or not the proceeds of privatisation are included, and at the same time made prudent increases in spending in certain priority areas.
As for monetary policy, I never really expected the right hon. Member for Sparkbrook to understand the complexity of operating it, a skill which would anyway be quite pointless for him to try to acquire since, fortunately for the nation, he will never be required to discharge that responsibility.
There is absolutely no change in this Government's view that the key to controlling inflation is monetary policy, and the key instrument of monetary policy is short-term interest rates. That policy is delivering the goods.
I accept the fact to which the right hon. Member for Sparkbrook referred, that interest rates here are higher than in other major industrial countries. There are a number of reasons for that, including the high level of pay settlements, and the premium needed to cover the market's fear of a Labour Government—however unlikely that may be. But, as I explained in my Mansion house speech, my objective has to be to keep short-term interest rates, on average, at whatever level is necessary to achieve the overriding aim of securing monetary conditions that bear down on inflation.
The trouble with the Opposition parties is that they cannot make up their mind whether they are coming or going. They want to argue both that monetary policy is too loose and that interest rates are too high. They say openly that they would borrow a great deal more and then they say that they would get their interest rates down. They do not know whether they are coming or going or which way to turn.
Opposition Members are always keen to demonstrate their compassion for the needy in society but the rampant inflation that their policies created—

Dr. Jeremy Bray: rose—

Mr. Lawson: I am afraid that the right hon. Member for Sparkbrook has taken up the time for interventions.
Opposition Members are always keen to demonstrate their compassion for the needy in society, but the rampant inflation which their policies created left millions of people watching helplessly as the value of a lifetime's savings was eroded. Inflation does not create jobs; it destroys them.

Dr. Bray: rose—

Mr. Lawson: We have brought inflation down to the lowest levels seen for a generation. We have brought public borrowing under control and are gradually reducing the ratio of public spending to national output, even without taking acccount of privatisation proceeds. But within this overall constraint, and thanks in part to the attention—

Dr. Bray: rose—

Mr. Deputy Speaker (Mr. Harold Walker): Order. The hon. Member for Motherwell, South (Dr. Bray) must have seen that the Chancellor clearly does not intend to give way to him.

Mr. Lawson: But even within that overall constraint, and thanks in part to the attention we have paid to improving efficiency and value for money, we have been able to improve public services in priority areas such as education, health, law and order, and housing. The plans that I announced today will bring a further reduction in the ratio of public spending to gross domestic product, and further improvements in priority areas. In a moment I will compare that to the performance of the last Labour Government.

Mr. Robert Sheldon: What the right hon. Gentleman has just said is very important. Right from the beginning of monetary policy it was the monetary aggregates that were the key to the reduction of inflation. Today, he has announced that the prime instruments that he will make use of in reducing inflation are interest rates. Therefore, there has been a switch from monetarism to the old standby of reducing activity and so reducing inflation by the use of high interest rates. It is the old, old story. The right hon. Gentleman has changed completely.

Mr. Lawson: I recommend that the right hon. Gentleman should read my speech to the Lombard Association in April, when I set this out at great length. Given that he was once a Treasury Minister, I am astonished that he makes no connection between the demand for money and the level of interest rates. One relates to price, and the other to supply and demand.

Dr. Bray: rose—

Mr. Lawson: I have just given way.
Let us contrast the record of this Government with that of the last Labour Government. They spent money all right—13 per cent. more on public expenditure in real terms in 1974–75 than in 1973–74—and they increased public borrowing eventually to more than 9 per cent. of GDP. But far from leading to the Socialist nirvana that they were expecting, it led them simply to the international equivalent of the bankruptcy court and a lesson in 0-level economics from the IMF. Spending then had to be cut, and they cut it in very damaging ways that we have had to make good.
The Opposition's motion accuses us of cuts in public sector capital spending. That is rich. We have kept capital spending roughly the same in real terms. It was Labour who cut it—by 20 per cent. in real terms. And look at Labour's priorities. During their whole time in office, capital spending on the Health Service fell by 30 per cent. in real terms, and with the plans that I have announced today we will have increased it by 30 per cent. in real terms.

Several Hon. Members: rose—

Mr. Lawson: No, I shall not give way.
Spending on motorways and trunk roads — [Interruption.] Opposition Members do not like to listen to this, but they will have to. Spending on motorways arid trunk roads also fell by 30 per cent. in real terms under Labour. Today's announcement means that it will be nearly 30 per cent. higher in real terms in 1987–88 than in 1978–79.
I will admit to cutting the cost of building roads. In real terms the public now gets six miles of roads for the price of five compared with the time that we took office. Given the differences between our record and that of Labour, it is nothing short of an impertinence for the Opposition motion to accuse us of cuts and for the right hon. Member for Sparkbrook to say, as he did in a recent speech, that a Labour investment programme would ensure that
essential and long neglected services — roads, houses, hospitals, schools—are at last funded.
Labour cut those services by 30 per cent. in real terms and by 20 per cent. overall.
Therefore, I am more than happy to compare and contrast our record in office with that of the Labour Government. However, unlike the right hon. Member for


Sparkbrook, it is not my habit to dwell on the past for too long. He has given us a few glimpses of how he would manage the economy if ever he were to be given the chance. From his recent pronouncements, some people might think that he was a reformed character. According to one of his recent statements,
We were, and we remain, determined to promise no more than the nation can afford … Of course, the easiest way to reduce the ratio of debt to GDP is to allow inflation to rise".
That is what he said, and he should know, because that is what Labour did when in office, and that is what it would do if it were to get into office again. The right hon. Gentleman also said:
Working within that firm financial framework, the next Labour Government will have to operate a system of strict policy priorities".
Where have I heard the words "firm financial framework" before? In part these plagiarised sentiments are aimed at the voters because the right hon. Gentleman knows that they rejected Labour's profligate approach in 1979 and 1983.
In part they are no doubt aimed at the financial markets. But most of all they are aimed at the right hon. Gentleman's own colleagues, sitting with him on the Opposition Front Bench — not today, because they cannot wait to get away —who have been so ready to promise the earth and think about how to pay for it later. For example, the right hon. and learned Member for Monklands, East (Mr. Smith) is on record as saying:
I am sure that it's not important to cost everything in detail.
That is the sort of remark that we normally associate with his hon. Friend the Member for Oldham, West (Mr. Meacher).
We have some sympathy with the right hon. Member for Sparkbrook, given his difficulties with his colleagues, but the trouble is that he is far too late because the country and the financial markets have already heard enough to understand what another Labour Government would be like. The answer is that they would be exactly like the Government we had before—back to the disaster of the 1970s, with massive Government spending increases.
To try to get some rigour into the debate—which I thought the right hon. Gentleman would welcome—my right hon. Friend the Chief Secretary had a costing done of the Opposition's pledges, and they amounted to a total of £28 billion. For months and months the right hon. Gentleman has had no answer to that. The Opposition have a non-answer, and try to pray in aid the Institute for Fiscal Studies, but the right hon. Gentleman's "only" model of reassurance is that the first year cost would be only £10 billion—as if that were not more than enough. At least he admits to that, even though on his own dubious arithmetic it would be another £4 billion or so on taxes and roughly twice as much borrowing as we have now.

Mr. Nick Raynsford: And unemployment down.

Mr. Lawson: How ignorant can one get to imagine that that would lead to a reduction in unemployment. When Labour went on its spending spree, unemployment doubled.
But only the right hon. Member for Sparkbrook could believe that the first year is all that matters. We elect Governments for a whole Parliament, and what happens

during the whole of that Parliament is what matters. If Labour were ever to be elected, which pledges would it fulfil? If some are to be deferred, what would they be? The House and the country have a right to know.
I have today published this Government's expenditure plans for the next three years, and the House knows, that they are backed by detailed costings, properly worked out. We have a right to ask the Opposition what alternatives they are putting forward. Which pledges would be met and which would not? I shall gladly give way now for an answer.

Mr. Prescott: We shall certainly answer the right hon. Gentleman's challenge about the use of public expenditure. We can get people back to work, and one example that we shall carry out is the commitment to return to Labour's previous housing programme when 2,000 houses a week more were built than during the period of this Government.

Mr. Lawson: Clearly I should not have given way, because that is no answer to my question. I therefore ask it again, so that there will be time to answer it in the reply. In his letter, the Chief Secretary listed a number of specific Labour pledges. I ask a simple question: which of those pledges will be deferred and which will not?

Mr. Prescott: rose—

Mr. Lawson: The hon. Gentleman is too late.
It is idle to pretend that Labour's pledges could be funded simply by increasing taxes on the better off. Even the right hon. Member for Sparkbrook has come to realise that, because after vainly trying to maintain that taxes would go up only for the top 5 per cent. of the population, he admitted defeat and said that the point above which people would have to pay more would be
a jagged, or broken, line".
The right hon. Gentleman has a jagged and broken policy, and the overwhelming majority of the population would have to pay more taxes if he were ever to come into office.
In any case, the right hon. Gentleman's attempt to raise taxes for the top 5 per cent. would be most unlikely to raise anything like the £3½ billion which he claims it would. All the evidence suggests that extremely high tax rates reduce rather than increase the amount of revenue raised, and that lower top tax rates bring in more, not less, revenue. That is precisely what has happened. The top 5 per cent. of taxpayers now pay 27 per cent. of total income tax revenue, which is a higher proportion than they ever paid under the Labour Government.
Throughout the world, countries such as India, Australia and New Zealand as well as France, Germany and the United States are realising that and are reducing their rates of tax. It is only the Opposition in this House who are out of step. It is clear that either some of Labour's pledges would have to be deferred, in which case we had better hear which ones, or that the tax burden would have to go up for everybody, or, more probably, both.
Perhaps that is why the right hon. Gentleman the Leader of the Opposition stepped in last week with his own new suggestion for raising money. He has pledged Labour to what he euphemistically refers to as a "revision" of mortgage interest tax relief. No doubt the 8 million people who currently benefit from it will draw their own conclusions.
Our economic policy has delivered low inflation, sustained growth, and a million new jobs since 1983. That


is the way forward. The Opposition offer polices which the electorate rejected decisively in 1979 and decisively again in 1983, and which the people of this country will reject again when, in the fullness of time, they are given the opportunity to do so.

Mr. Roy Jenkins: Although the Chancellor of the Exchequer's speech included some enjoyable debating points against the Opposition, it must have a high claim to qualify as one of the most complacent that 1 have ever heard from him or from anybody else in the House.
The right hon. Gentleman can at least be regarded as relatively lucky in the sense that this debate takes place today, not a few weeks ago when he was more manifestly up against the ropes. Indeed, I suspect that he will be so again in only a few weeks' time. It is perhaps not a great tribute to the Opposition's sense of timing that they fixed this debate today. Of much more significance is the fact that his respite is short-term, whereas the faults of the Government's management are deep-seated and long-term.
I deliberately used the word "management" rather than "policy" because it is now almost impossible to tell what the Government's economic policy is. Insofar as it exists, it is in a state of complete confusion. In the early days of the Government, the policy used to be clear, perhaps too clear. It was also wrong. It was obsessively monetarist—there is certainly room for monetary policy in the management of the economy — and it sought to keep sterling M3 within a steadily declining range.
Sterling M3 is now growing at about 18 per cent., so the Governor of the Bank of England was encouraged recently to say that it was an unreliable indicator which should be and probably would be abandoned. There goes the old centrepiece of the Government's policy. There is a new form of Luddism—if one does not like the reading on an instrument, one destroys it and picks up another instrument in its place.

Mr. Lawson: Will the right hon. Gentleman give way?

Mr. Jenkins: I have hardly started, but yes.

Mr. Lawson: I set out at considerable length and clearly the Government's monetary and fiscal policy in a speech which 1 gave to the Lombard Association in April this year. I hope that the right hon. Gentleman will read it before he says that there is nothing clear about the Government's policy. Meanwhile, perhaps he would care to tell the House what his policy is.

Mr. Jenkins: Yes, I have read the right hon. Gentleman's speech to the Lombard Association. In the immortal words Ernest Bevin used when he was asked by Molotov through an interpreter whether he had studied Marx in the commentary of Hilferding,
You can tell Mr. Molotov that I 'ave read 'Ilferding and I found him tedious.
That is the position.
Whatever else the right hon. Gentleman did in his Lombard Association speech, he certainly did not clarify the Government's monetary policy. Nearly every independent commentator in this country and elsewhere has been even more muddled about the Government's policy since then than they were previously. The idea that

he made everything clear then is absolute nonsense. I shall tell him some of the policies that I would pursue, but I shall tell him, as he would do, in my own order, not his.
What other instrument will he put in place instead of this rejected sterling M3 which was such a centrepiece of Government policy? Will it be ML, or MO as it is sometimes called? That seems to be somewhat in favour again—although the Chancellor was not keen on it in his Budget speech— because at present it is giving the right result. Certainly the Bank of England, as is well known, thinks that it is virtually useless as an indicator. It is mostly notes and coins and says practically nothing about the future. It merely gives some indication of some aspects of the present. But as inflation picks up, as it certainly will somewhat, the indicator will also probably start misbehaving in its turn. What will the Government do then? Will they have another Luddite bash at MO and turn to something else? In that way, ML or MO will join sterling M3 in the category of not being "one of us"—not being reliable in its performance.
I hope that the Chancellor, whose manners are absolutely extraordinary and who could not come to listen to the beginning of the speech of the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley), will at least have the courtesy to listen to some of the speech of an ex-Chancellor. I have a good deal to say before I sit down and it would help him to listen to it.
If sooner or later all the monetary aggregates prove to be unreliable, there will be no alternative to an exchange rate target as a sheet anchor. That is a perfectly good alternative. We cannot have interest rates just stated like that. What is the Government's target? What are we working on? They say that we are working on interest rates. Interest rates can be a mechanism, but they do not tell one how to use the mechanism. If one abandons monetary aggregates because they do not work or work unreliably, one must have something to put in their place and an exchange rate target is the only effective alternative.
First, the Chancellor has declined to define an exchange rate target and, secondly, it cannot be said that his recent interest rate decisions have been coherently aimed at an exchange rate target. If they have been aimed at anything, as opposed to being merely a reluctant, inevitable reaction to circumstances, they have been aimed at political targets, especially the Conservative party conference.
Thirdly, to try to base a policy on a secret exchange rate target — it has never been published — which is incompetently aimed at, while rejecting the support of the European monetary system direction finder, is perversity beyond the bounds of acceptable eccentricity.
We know or think we know that the Chancellor, together with the Bank of England and the Foreign Office, would prefer to be fully in the EMS, but they have all been overruled by the Prime Minister. That says a good deal about the Chancellor's lack of authority within the Government, to which I shall return later.
First, I shall deal with the substance of what is, after all, Government policy, even if the Chancellor does not agree with it. Several years ago, looking at the wreckage caused by largely irrational currency fluctuations, I formed and advocated the view that the way to get some necessary stability back was to construct a tripod of the dollar, the yen and the ecu, with sterling coming fully into the European monetary system mechanism, and with the authorities of those currencies or groupings accepting


responsibility for keeping them in a reasonable relationship with each other. A full return to Bretton Woods would be a bridge too far in present circumstances. That tripod seems to be both practical and desirable.
Without fanfares — they do not matter — to a substantial extent that has now occurred. The authorities of the three major currencies are accepting that responsibility and are keeping the three in a reasonable relationship with each other. However, there is one important exception. Sterling has not adhered and is outside the triangle. It is the only even medium-sized currency to be on its own.

Mr. David Howell: The right hon. Gentleman has enormous experience and was one of the founding fathers of the EMS. He talks about the yen, the dollar and the ecu. Surely he means the yen, the dollar and the deutschmark. The ecu is not a currency but an expression of an indexed unit, the use of which arises only because the European currencies are so volatile that it pays some countries to use ecus. Surely he means the deutschmark.

Mr. Jenkins: I mean the ecu. The right hon. Gentleman has also studied these matters carefully and constructively so he must know that the ecu is increasingly used in private transactions throughout the world. He should not, therefore, dismiss it as a figment. It is extensively used in private and bank transactions.
Let us not worry too much about the nomenclature, but let us consider the tripod with three legs. One of those legs must be a European leg and so long as sterling is outside that leg is hobbled. That is a disadvantage to us and the other countries, not so much because of the importance of sterling, but because of the importance of London as a financial centre.
Beyond that, and looking at the matter from British self-interest, the wider interest is of considerable importance. If I were to choose one significant currency in the world which was least suited to steam off on its own across a tumultous ocean, rejecting the company of any convoy, it would be sterling. That is the perversity of the Prime Minister's choice. It is not only a hazardous choice but it is a ludicrous choice. It would be splendid only if we genuinely rejected all support from others. But do we?
Three weeks ago we were cap in hand to the Bundesbank. The future of the pound now depends very much upon OPEC and its decisions. Only the sheikhs may cut production and send oil up to $18 or $20 per barrel and only they stand between the Government and the total collapse of their policies.
The Prime Minister's attitude to the EMS is, in a financial context, a repeat of the old song that Britain is not as other countries are and that Britain must always remain somewhat outside. In a political context that has been the constant accompaniment to our national decline over the past 35 years.
I come back to the Chancellor. Why is his reputation so low this autumn? The Government, I regret to say, are not doing badly with public opinion according to the indications. But not the Chancellor. He made a technically good speech at the Conservative party conference. That speech contained part of the clue. It was not a Chancellor's

speech. It was a success because it told the audience exactly what it wanted to hear, with not a single uncomfortable message.
By the time of the Mansion house speech, the Chancellor seemed to have lost both his new speech writer and anything to say. Perhaps that was because his exchange rate policy had been vetoed by the Prime Minister. As one commentator put it, he stood up and said, "I haven't got a monetary policy, but trust the Chancellor." But the people do not trust the Chancellor. The City does not trust the Chancellor. For the Chancellor to try to found a policy on trust is like the Prime Minister trying to found a policy on humility.
A Chancellor who is so easily vetoed by the Prime Minister on his direct responsibility—the exchange rate policy — is not up to his job. Under the manifold pressure of modern government, the Chancellor is effective only if he is almost as necessary to the Prime Minister as he or she is to him. By contrast, the present Chancellor could be bundled into a political dustbin without a squeak of protest from the voters, the City or even the Conservative party. The right hon. Gentleman is not a Chancellor. He is a mannikin with a thick coating of bombast.
The Chancellor's weakness, the monetary muddle, the exchange rate confusion, would not matter greatly if underlying factors—the real economy—were sound. But are they? Let us start with the Government's strong point—the jewel in the crown, if there is one—inflation. It is down, but it is the highest, somewhat, of any country supporting a major currency. We are one of the five which support major currencies. Whatever else that suggests, it hardly suggests a unique achievement. It is likely to return to an upward trend.
The combined efforts of Government policy since 1979 have been not to improve but substantially to worsen our competitive position. We have gone from a huge manufacturing surplus of £5·5 billion in 1980 to a 1986 third quarter deficit of £8 billion a year. I do not think that that will be repeated in forthcoming quarters. I certainly hope that it will not. It is the road to disaster.
Even with oil production continuing for some time, the current account has gone from a £3 billion surplus to a deficit predicted by the Chancellor of £1·5 billion. The deficit might be even worse. That is not surprising, as the stock of capital equipment in manufacturing industry is lower than it was seven years ago. In addition, we have the Chancellor's complacency and the stark words of the Government's submission to the European regional development fund which states:
In the present difficult economic climate, investment in directly productive industry is at a low level.
I take it that in an official document the Government were telling the truth and not deceiving the ERDF to get more money.
Sadly, the Government's great contribution, having refused to stimulate the economy by more respectable means, is a roaring consumer boom, which there is not the slightest chance of their moderating before an election. A roaring consumer boom does not, to any significant extent, mean more employment. In our competitive position, worsening under the Government, it means overwhelmingly higher imports, a still worse balance of payments position and a classic path to perdition.
To have produced, after seven and a half years, the combination of total monetary muddle, a worsened


competitive position, a widespread doubt in other countries as to how we are to pay our way in the future, a desperately vulnerable currency and the prospect of an unending plateau of the highest unemployment in a major country in the industrialised world is a unique achievement over which the Chancellor is an appropriate deputy acting presiding officer.

Sir Edward du Cann: I agree with what the right hon. Member for Glasgow, Hillhead (Mr. Jenkins) said at the beginning of his speech. However much good news there may be, this is no moment for complacency. However much good news there is, there is one piece of consistently bad economic news, and that is the present, high and tragic rate of unemployment. It is excellent that the United Kingdom's employment rate is the highest of the major European Community countries. It is excellent, as my right hon. Friend the Chancellor of the Exchequer pointed out, that new jobs are up by 1 million since 1983. Incidentally, how good it was to hear him speaking with such confidence and style. Even so, the highest priority of any Government should and must be stabilisation of the unemployment rate and its reduction.
The international context is hardly encouraging. As the most recent Bank of England paper says, "The world economy pauses". The immediate reality is that the United Kingdom is experiencing a disappointing year to date economically. Exports have stopped growing, fixed investment shows little growth, industrial production is hardly buoyant and a rise in consumption, as the right hon. Member for Hillhead said, owes too much to heavy consumer borrowing and increases in incomes for comfort, although, broadly speaking, we are a low-wage economy.
The question is: what is to be done? I make no secret of my views. I wish to see our country pursue an expansionist cause and mount a more convincing and imaginative attack on both unemployment and low wages. Any such advocate is usually told that that is a policy that would put the fight against inflation at risk. I would answer, "Poppycock." In the first place, I am and I always have been a supporter of the Government's medium-term financial strategy — that is sound money. The Government have never been fully committed to monetarism, as the Select Committee on the Treasury stated in its third report, published in February 1981. The Government have never had the courage of what their enemies call their conviction. If there is an author of monetarist policies in the United Kingdom, it is the right hon. Member for Hillhead.
There is no conflict there, and in any case, I care more about people than for any economic theory, for experience disproves them all, in greater or lesser degree, sooner or later.
I have two recommendations for my right hon. Friend the Chancellor, both of which are in tune with what I understand Government policy to be. I introduce them by putting a question. Why are the Government so halfhearted about so much that they do? For instance, why are they so unsuccessful in the control of state expenditure? Every year, the all-party Select Committee on Public Accounts, whose distinguished Chairman is here now, reports numerous examples of failure adequately to control expenditure. It is obvious that by comparison with private industry, financial controls in Government are wholly inadequate.
For example, the Rayner exercise rose like a rocket when it first started. Like a rocket, it excited a moment or two's attention, but it and its lessons are now locked away in an anonymous bottom drawer. The reality is that the scope for huge savings in domestic public expenditure in the budget total is largely unexploited. In my view, for what it is worth, it runs into billions of pounds.
As to overseas expenditure, the European Community sucks up cash like a sponge. Our net contribution since 1973 is no less than £7·5 billion. The lack of will on the part of member Governments to exercise a proper discipline over community expenditure is nothing short of pathetic.
The determination to effect a proper economy in the expenditure of taxpayers' money should be a success story for the Government, for everyone is a taxpayer and therefore everyone must be in favour of careful spending. However·here is the paradox that one saw when the Chancellor was making his autumn statement — my colleagues are defensive about their policies in the face of the crescendo of whining complaint about economies that is our daily experience.
It is high time that we changed gear. As the Institute of Directors pointed out in a recent admirable paper, research by the World Bank shows a clear connection between low public spending, low taxes and high growth, including employment growth. However, in the United Kingdom, the total tax burden is higher than it was in 1979, when the Government took office, and that is a shameful fact. We have a succession of public and semipublic arguments and agonisings of one sort or another, year after year, over the Government's public expenditure plans. Always, the end result is the same — total expenditure exceeds expectations, but the public has an unshakeable belief that every part of expenditure has suffered substantial, some would say uncaring, cuts. That is political brilliance—getting the worst of every possible world.
It need not be so. I recommend two priorities to my right hon. Friend the Chancellor, which would change the situation dramatically and for the better. On the first, I agree totally with the right hon. Members for Hillhead and for Birmingham, Sparkbrook (Mr. Hattersley). It is essential that we give top priority to helping manufacturing industry. The Government set the climate in which industry works and in some respects, they have done extraordinarily well. For instance, a few years ago we were, as the House knows, a strike-prone society. Happily we are now largely a strike-free society, and that is something for which we can be deeply thankful. In other respects, the Government are doing carelessly badly.

Mr. Prescott: In the interests of truth, are not the facts that in the period of this Government, we have lost more working days in disputes than we did in a similar period of Labour office?

Sir Edward du Cann: With great respect to the hon. Gentleman, the events of the winter of discontent, for example, are freshly in the memories of us all to give the contradiction to what he is now claiming. The Government create the climate, and in the field of industrial relations, the legislation introduced over the past half dozen years has been a positive force for good. In other respects we have acted carelessly and, I think, badly. I shall give two examples of what must be clone. First, we in government could do a great deal to reduce


costs for industry. We allow too many costs to be continuously too high. For instance, electricity costs in the United Kingdom are higher than those in most competitor countries. That cannot be right. Interest rates are an enormous burden, especially on smaller businesses.
Apart from costs—no doubt other right hon. and hon. Members can give their own examples—there is the subject of training. Whenever I visit schools or universities, I remain immensely depressed at the unworldliness of academics' approach to life as it really is. There is too much theory and far too little practical interest is taken in subjects, such as mathematics, science, and so on. Manufacturing still represents over 50 per cent. of our exports. Remarkable though the development of small firms has been, they depend on the bigger firms and their prosperity. They are all interdependent.
What I am trying to say to the Government is this: the figures cited by the hon. Member for Hillhead about the decline of manufacturing industry were correct. We should all be deeply worried at present trends. The best thing that we can do is find a multitude of practical ways of ensuring that the burdens on industry are reduced so that it can compete more effectively in world markets.
Second, we must achieve massive tax cuts if we are to have a new prosperity. We need a strategy and we need targets to which we are determined to adhere. We must reject the direction in which, it seems to me, the European Community is moving. It seems to be careless about tax matters, and often it seems ready to consume money in unlimited quantities. By way of contrast, tax reduction and tax reform in the United States have created 9 million new jobs since 1981. Henceforward, the top brackets will be as low as 18 and 28 per cent. The highest rate is lower than the United Kingdom's standard rate.
The United Kingdom's tax and benefits system is quite chaotic. The biggest business in our economy is the transfer industry — Government taking money out of one private pocket and putting it into another. After all that activity, over half the population is in the same position, broadly speaking, after paying taxes and receiving benefits, as it was before. So the transfer industry is the most inefficient business in the country, if not in the world. It is certainly the most expensive.
National Health Service costs are approaching the huge sum of £20 billion a year. Yet, as we all know and complain, quite rightly, the percentage of the gross national product spent in the United Kingdom on health care is lower than that spent in the United States, Sweden, Germany, the Netherlands, France, Denmark and Norway. The transfer industry is the area to attack, and hard.
I have argued many times in this Chamber for a massive increase in capital expenditure to provide new schools, hospitals, prisons, and so on. A boost for the construction industry would be a terrific boost for employment. It could be achieved almost overnight if as many of those desirable projects as possible were turned over to the private sector.

Mr. Peter Hardy: Although it is right to call for increases in capital expenditure, is the right hon. Gentleman aware that the building supply industry has reduced its capacity as a consequence of the Government's policy? So even the best intentions will be delayed before they can be implemented.

Sir Edward du Cann: The hon. Gentleman is right. There is always a time lag. That is all the more reason for starting immediately. Many of those desirable projects to build new schools and hospitals should be turned over wholly to the private sector. If that were done, Government expenditure would reduce and, therefore, the Budget total would reduce. The state would acquire a massive accretion of capital assets financed through rental payments after only a few years. There would be as much, if not more, scope for tax reductions as ever have been derived from asset sales.
I argue for setting free the builders, the hospital administrators, the local education authorities and the Home Office — free from the constraints of financial limits, free from capital allocations, and so on, and free from the whole administrative infrastructure that goes with them. Let us say yes to new projects on a massive scale. Following that, the scope for tax reduction is assured.
I believe that my right hon. Friend has a brilliant opportunity in his next Budget. I pray that he takes it with courage and imagination. It was disappointing to hear nothing in today's statement about either the control of Government expenditure or potential tax reductions. We have heard great boasts outside this Chamber about privatisation. A further dose of privatisation in the way I suggest would undoubtedly enable him to both reduce Government expenditure and substantially reduce taxation. I am impatient to see him do so. I think that the mood of the country is sympathetic to the idea generally. The foundation is laid. In my view, we should literally build on it.

Mr. Robert Sheldon: The right hon. Member for Taunton (Sir E. du Cann) was quite right to draw attention to the problems of manufacturing industry under the Government when many of our exports depend on manufacturing industry. It may well be that the Government, who have not paid much attention to manufacturing industry and are faced with a balance of payments deficit for the first time—that is a notable change in the past seven years—will begin to accord to manufacturing industry some of the assistance that was given to it in the past.
I echo the comments made by the right hon. Member for Glasgow, Hillhead (Mr. Jenkins) and express my regret at the early departure of the Chancellor of the Exchequer. The motion before us condemns his actions. We should express our dissatisfaction at the fact that he left the Chamber when the right hon. Member for Hillhead had hardly begun his speech. I hope that that message will be passed on to him. In his Budget statement this year, when dealing with oil and oil revenues, the Chancellor said:
Inevitably, we suffer a decline, too, in the value of our net oil exports. But the oil price fall will be beneficial for the industrialised world as a whole. Even for the United Kingdom, what we gain on the swings should, over time, more than offset what we lose on the roundabouts." — [Official Report, 18 March 1986; Vol. 94, c.168.]
I find that statement impossible to understand. It seems to me as egregious nonsense as one can utter on such an important matter. What the Chancellor could have done with oil revenues was to add them to the national income and export benefits that we get, so that we would end up with a higher gross national product. That would have been of advantage to us if it had been used properly.
I call in aid the Morgan Grenfell economic review, which, happily, I found on my desk this morning. It was a useful review, pointing out the advantages that we have had from oil exports and showing the effect of the decline in the price of oil on certain other countries—from Japan, Italy and Germany, which have benefited enormously from the drop in the price of oil, to ourselves, who have lost considerably. It is a clear picture. Our industrial competitors benefited largely, and we lost considerably.
In a number of respects, we must consider oil as a commodity that is not much different from other commodities. If we happened, as a country, to be a big grain producer, such as France or the United States, our interest would lie in a high world price for wheat and maize. If we were a coffee-producing country, such as Brazil, our interest would lie in a high world price for coffee. If we were big potato farmers, we would be happy for a high world price for potatoes.
Similarly, we should be able to recognise our own interests staring us in the face and rejoice in a high world price for oil. Unfortunately, we have not been able to gain the benefits that would accrue from that, but if we want to do so we must act. Both the two forms of action that I have suggested are necessary but unfortunately inimical to the present dogma of the Conservative party.
First, it is necessary to hold talks with OPEC. I am not saying that we should become members of OPEC if it is unwise enough to change the rules of membership, but we can talk and—what is harder for this Administration—listen.
The Chancellor of the Exchequer prides himself on the fact that we have the freest oil province in the world. He said that in his Budget statement this year. Why should we pride ourselves on that? Why should we be less interventionist than the United States or Canada? Why is it thought that we have something to be proud about? I would sooner pride ourselves on the fact that the oil industry is working for the benefit of the entire country and for its future. The level of the output of oil should not be left to companies which may have no involvement in the future industrial performance of Britain. It should be determined by the interest to our country in maximising our resources and the prosperity of Britain as a whole.
Secondly, I would wish to relieve industry, and possibly consumers, of the effects of higher oil prices. For a start, we could reduce oil taxation. That is an easy action to take and a welcome one, and it would provide an offset against higher oil prices. Interest rates also need to be reduced, for reasons that we have heard, and they could be reduced still further as higher oil prices strengthened the pound. Important also is the fact that there could be a trade-off between the benefits to the Exchequer from the higher oil price and the passing on of some of those benefits to our hard-pressed industry.
Genuine investment incentives might be considered. I grant that the best expenditure is made when the manufacturer decides that particular investment is required irrespective of the help that a Government may give but do not let us scorn the investment that comes when a Government are involved. After all, every successful nation practises that form of investment, and so should we. The trouble is that we are not very good at it. We are not very good at merging the interests of the Government and industry. It is a grievous fault that we possess; a fault which other countries do not have to

anything like the same extent, and one that we should be busying ourselves in putting right. We should not be adopting the hands-off attitude that is so common now.
I turn to what I call sterling M3 and other good luck charms. I, like a few of my hon. Friends, have a copy of the Financial Statement and Budget Report 1980–81. It is a treasured copy. It is signed by the Financial Secretary to the Treasury, who happens to be the present Chancellor of the Exchequer. It set out in detailed form how we would obtain all the successes arising from the control or monetary stock. It shows how the money supply was to be connected directly to the reducing of inflation, from 7 to 11 per cent. in 1980–81, down to 4 to 8 per cent. in 1983–84. In fact, it was 10 per cent. during that period. Undeterred in 1985, the Financial Statement and Budget report brought forward by the Chancellor of the Exchequer rearranged the timetable to bring the range down to 2 to 5 per cent. in 1988–89.
We have seen the level of inflation reduce to 2·5 per cent., and the latest money supply figure of September 1986 is 18·3 per cent. If there is any connection between the sort of monetarism practised by the Chancellor of the Exchequer and the reduction of inflation, it is contradicted by the statistics on which the right hon. Gentleman set the monetary targets in 1980. I know that economic targets are not easy to achieve, but a Government who put the fullest possible trust in an economic objective and failed so signally deserve a special page, possibly, in "Guinness Book of Records".
As the right hon. Member for Hillhead said, the Governor of the Bank of England finds himself completely bemused. The Chancellor of the Exchequer, as is his wont when he is challenged, said today that monetary indicators are very important, but no one really believes that he pays much attention to them. We heard today, more clearly than in any speech that the right hon. Gentleman has made previously, that interest rates are much more important than he has ever allowed for in the past. Interest rates interact with the level of exchange rates, as the hon. Member for Hillhead said, but it is only an interaction. If we were to find that it required too high a level of interest rates to achieve the exchange rate that we want, there would have to be a modification. The prime factor is likely to be the exchange rate, but it is influenced by the level of interest rates and the level of economic activity.
Gone out of the window is any attempt to continue with the sort of monetarism that has been preached, but because it was preached it tends to be reaffirmed in some way each time the Chancellor of the Exchequer deals with these matters. We know what the reality is, however.
Very high interest rates have been disastrous for manufacturing industry, as well as the high pound. There was always some sort of a case to squeeze the home market and make the export market more attractive to industry by a combination of high interest rates and low exchange rates. That was the de Gaulle solution in 1958. There is a case to be made also for encouraging the home market to achieve economies of scale, and that was the basis of Maudling's dash for growth. No case can be made, however, for a simultaneous squeeze on export markets and home markets by high exchange rates and high interest rates. We have clearing bank base rates of 11 per cent., which means interest rates of 13 per cent. or more for good-class borrowers. That means that in real terms they are paying over 10 per cent., which is historically high. As for the poor, wretched new companies which get all the


crocodile tears from the Government — these are companies which have not established themselves—they are faced with interest rates of 12 or 13 per cent. It is extremely difficult to establish a company on that basis.
In these circumstances, the only gainers are the financial intermediaries. The City booms, in direct contrast to the decline of manufacturing industry. The wretched aspect is that the House is divided, not into political parties, but in the types of constituency that we represent. There are rundown manufacturing towns and there is the affluence that is provided by the City of London and dispersed in an area around it, where those engaged in the City live and work.
In March 1986, 9·6 per cent. of all employees were employed in the financial sector. Is this a wise division of our resources in the present harsh economic climate? We are grateful, of course, for any jobs, but in the long term should the building societies, banks, insurance companies and unit trusts —all the financial intermediaries which take our money and place it elsewhere — have such a dominant role in our economy? I remind the House that 60 years ago Sir Winston Churchill eyed the City of London and compared it with industry and said that finance should be less proud. I regret that the Government have no equal in pursuing a course opposite to that advocated by Sir Winston.
It is right, as the right hon. Member for Taunton said, that we must start giving much more assistance and attention to manufacturing industry, not least because of the damage done to it over the past six or seven years. More than a third of the manufacturing industry within my constituency has been lost, and that is reflected elsewhere. These were small, good and viable firms which could have continued to earn a living by producing medium-tech articles and objects. Sadly, all these firms have gone and they cannot be resuscitated. We must make an early start in trying to build up and build upon what we have.
The Chancellor of the Exchequer looks to privatisation to make up his deficiencies. We know that there is a great deal of money sloshing around in the economy, and we know, too, that house prices have increased enormously. We know that credit levels are historically high and that credit card use has expanded out of all recognition. We know also that, because of the increase in house prices, house buyers' collateral is historically enormous. With a £60,000 house on which repayments of £20,000 have already been made, a number of people have many thousands of pounds of credit which they can use to convert capital to income. It is increasingly easy to convert capital to income, via building societies, among other ways.
The trouble is that the oil money is not enough. The Chancellor of the Exchequer is using that oil money. He is using privatisation money from British Telecom, gas and, later, water for current expenditure. With the use of oil money to finance current expenditure, and privatisation to finance current expenditure, the scene is being set for an election some time next year. That is what it is all about. Once again this country will pay a high price. It normally pays a bit of a price for an election. It will pay a much higher price for the next election, to the disadvantage of every one of us.

Mr. Ray Whitney: The right hon. Member for Ashton-under-Lyne (Mr. Sheldon) made a good deal of the importance of high interest rates and the damage that they cause. He must consider also the impact on interest rates of the policies that are seemingly advocated by his party, should it ever come to power. As a certain leader across the Atlantic said, "We ain't seen nothing yet," as far as that is concerned. The right hon. Gentleman should take cognisance of the fact that the creation of new companies at the rate of about 550 a week suggests that entrepreneurs are coming forward and are not deterred by the level of interest rates — much as we would all, of course, like to push interest rates down. Certainly, the way forward cannot be the one advocated by the Opposition parties.
One strange aspect of the speech by the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) was the absence of any suggestion of his own policies. This was the dog that did not bark. Indeed, when pressed by one or two of my hon. Friends to vouchsafe comments on the Labour party's record or promises for the future, a note of panic entered his voice. He said, "We chose this debate so that we could talk about the Government's policy." That is understandable, given the sort of policies that are offered to the country. Whether we are talking about £10 billion expenditure, £28 billion expenditure or the £8 billion pot of gold mentioned by the hon. Member for Oldham, West (Mr. Meacher) for health and social services, the impact and the consequence would be disastrous, not least, as I have said, on interest rates and the level of the pound. So-called social ownership is the side development of the party that has not changed the red flag for the red rose. Nationalisation is changed to social ownership, but the effect is the same. The same applies to the impact on pension funds, which affect many millions of workers throughout the country, and the threats which the right hon. Member for Sparkbrook and his friends have uttered about what they would do about Government interference with pension funds.
I could continue to list the threats and promises of the Labour party, but the debate is on the Government side of the House. As so often happens in important measures, the contributions from the Liberal and Social Democratic parties are difficult to find. It is always difficult to find their policies or, indeed, those who enunciate them. The right hon. Member for Glasgow, Hillhead (Mr. Jenkins) made an extraordinary personal attack on my right hon. Friend the Chancellor of the Exchequer. His only recommendation seemed to be that we should join the European monetary system. I listened with interest to a number of comments by my right hon. Friend the Chancellor of the Exchequer on that topic, which will continue to be a subject of debate.
Some of my hon. Friends wish for even more capital spending. I hope that they take account of the autumn statement, which promises an increase of a third of £1 billion in capital spending across the programmes enunciated by my right hon. Friend the Chancellor. That is an important step. Those who attach such importance, understandably and rightly, to Government spending should take due account of that fact.
Monetary figures and economic management are other sources of concern. We all recognise that the management of an economy such as ours is very delicate and complex.
Hon. Members on both sides of the House are lured into the belief that the power residing within any Chancellor of the Exchequer to manage the economy is a great deal less than one might suppose from noting the debates in the House or from reading the views of the newspaper pundits. But to the extent that the Government can manage the economy, it is a complex process.
There must be a two-part approach to the economy. The first involves steady adherence to clear medium and long-term objectives and readiness to cope adequately with short-term pressures and dangers. No one has a better record in that regard than my right hon. Friend the Chancellor. Prior to his being Chancellor, he was Financial Secretary to the Treasury. If I may declare an interest, for a short time I had the privilege to serve as his parliamentary private secretary. He is aware of the short-term dangers. We must guard against the danger of the inflationary pressures which are building up within the economy. This is a crucial matter and one on which we have had outstanding success.
I recognise that present conditions are different from those in earlier years. Conditions today are better because of the Government's achievements. For example, unlike the conditions which obtained in the 1970s, the present inflation rate is far below the current level of interest rates. One effect is that, to a much greater extent, people hold a far larger proportion of their wealth in bank deposits than they did before. This is just one of the technical changes in the financial system which have occurred in the past few years. Those changes have disturbed the relationship between the measure of broad money and the national income.
That matter was discussed in detail in the speech, to which my right hon. Friend the Chancellor referred with approbation, by the Governor of the Bank of England at Loughborough university last week in which he said:
It is fair to ask whether a broad money target continues to serve a useful purpose".
He went on to suggest that perhaps
we would do better to dispense with monetary targetry altogether 
Whatever difficulties are associated with the measurement of monetary targets and monetary statistics, the Governor was also right, in a speech a fortnight earlier, to point out:
Liquidity and credit have been gowing uncomfortably fast.
My right hon. Friend reaffirmed that he appreciates such dangers. I was glad to hear—I hope I correctly quoted what he said—that the Government's commitment to a monetary policy which will squeeze out inflation remains unabated. It is important that all his ministerial colleagues adhere to that commitment, but I recognise the pressures on them and feel guilty, as do virtually all hon. Members, about adding to the pressures on Ministers in spending Departments.
It is essential that we recognise, after all the Government's valiant efforts, that surrendering to inflation at this stage would be unthinkable. That must not be allowed to happen. We have come down a long and difficult road. There is too much at stake and the opportunities before us are too great to be missed.
There seems to be a spirit of defeatism — certainly among the Opposition—about what British industry is doing, and can do in the near future, about the opportunities offered to it. British industry enjoys many advantages which have been given to it since 1979. The featherbedding and overmanning of the 1960s are things

of the past. They will only return if the Opposition parties seize power — [HON. MEMBERS: "Seize?"] Perhaps I should have said when they are granted power. Perhaps some of the people in Militant Tendency made me use that word. Should the unhappy occasion come to pass whereby nationalised industries and local authorities are told to take on labour, we would be back to featherbedding. But, with this Government's policies, those times have passed.
Record resources are being devoted to training and investment. The past few years have seen sharp rises in Britain's overseas assets, in company profits and in the underlying rate of productivity growth. As my right hon. Friend the Chancellor said, sterling is now highly competitive. Its value against the deutschmark has decreased by about 30 per cent. since the middle of last year. There can be no country where venture capital is easier to obtain, although I recognise the problems caused by high interest rates.
The labour and trade union scene has been transformed, thanks largely to the Government's sensible trade union legislation, which gave back to trade union members the power they had lost to some of the union bosses. The attitudes which are now being reported on both sides of industry give me great confidence for the future.
All these factors add up to a great opportunity for British industry to compete ever more effectively on overseas and domestic markets. The outlook there is good. Demand in this country is strong. As my right hon. Friend the Chancellor said, consumer spending will grow by about 4 per cent. next year. As the London Business School pointed out, world trade is expected to grow by more than 6 per cent. next year—twice this year's rate.
Provided that we can keep our unit labour costs under control, I believe that contrary to the Opposition's pessimism, there is every reason to look forward to a sustained continuation of the economy's growth of the past five years. The new jobs to add to the 1 million created since 1983 will come from there. Those opportunities will be taken by the 550 companies that are being created each week.
It is from there that the increasing Government revenues will come to produce yet more schools and hospitals and even better social services. The Opposition clamour all the time for those measures, but only the policies of the Conservative Government can produce the resources to sustain them.

Several Hon. Members: rose—

Mr. Deputy Speaker (Mr. Ernest Armstrong): Order. I inform the House that, by order of Mr. Speaker, the ten minutes rule for speeches is now in operation.

Mr. Kevin Barron: The hon. Member for Wycombe (Mr. Whitney) said that he wanted to expand social services but the hard reality is that the Government's attack on the ability of local government to sustain and expand social services decries that aim.

Mr. Maples: How can the hon. Gentleman say that in the light of an autumn statement that has just allowed an increase of £4 billion in local authority spending?

Mr. Barron: In the past seven years, Rotherham metropolitan borough council has lost more than £30 million of rate support grant which would have gone into


expanding those services and programmes that have had be put out to contract because of what is happening in the Department of the Environment.
When I looked at the Order Paper and saw the amendment tabled in the names of six senior members of the Government, including the Prime Minister and the Chancellor of the Exchequer, a phrase that we use in Yorkshire came to mind. I wondered how anyone could have the "brass neck" to table such a motion claiming the success of this Government's economic policies. That view was strengthened when I heard the Chancellor say that the Opposition did not care about the plight of the unemployed. I should like to talk about the problems of the unemployed and what is happening in the regions that I and many other hon. Members represent.
To claim that the Government's economic policies have been successful is difficult if one comes from regions that have faced massive rundowns in those industries that have kept employment stable over many years. It might be good to claim success if one is in the top 5 per cent. of those income earners who, over the past seven years, have been given back more than £3 billion a year by the Government in tax handouts to the rich. One might be able to claim success if people have invested their money in banks and so on, and are in the fortunate position of having money.
The right hon. Member for Taunton (Sir E. du Cann), the hon. Member for Wycombe and the Chancellor talked of how well the Government had done. The right hon. Member for Taunton did not explain that in great detail. The 1 million jobs which we are told have been created since 1983 are certainly not full-time job equivalents. Since 1979, more than 1 million full-time job equivalents have been lost.
Unemployment in areas such as the Rother Valley is becoming critical. Since 1981, unemployment in my constituency has increased by more than 77 per cent. Of course, those are the numbers of registered unemployed, not the real figures. In July 1986, of the 6,421 registered unemployed in the Rother valley, 34·;8 per cent. had been unemployed for more than 12 months and 36 per cent. were under 25. Recently, the registered unemployed figure increased to 6,500. It has been increasing every month for a long time.
It is estimated that the cost to the public purse of unemployment in my area is £42 million a year or, to put it another way, each person working in the Rother valley has to find more than £1,100 from his or her income to pay for the unemployed. Real unemployment in the constituency is hidden by certain facts. In July this year, 2,800 16-year-olds left school in the Rotherham metropolitan borough council area, which covers three constituencies. Over 89 per cent. of them are without work or are going on to youth training schemes or courses.
YTS first started in the economic year 1983 and I have only recently been able to get figures relating to its first year of operation, 1983–84, from the Rotherham careers officer for Rotherham borough council. Those figures show that the success rate in the first year of YTS in the area was a little less than 50 per cent. These figures have taken time to collect because not everybody completed YTS training in the first year.
In the earlier part of the debate, Conservative Members spoke of youth training as the be-all and end-all for kids, yet for the majority of kids it is like being in a revolving

door. After 12 months — now presumably after two years—they come out of that same entrance. They leave the scheme knowing that they do not have a chance of full-time employment.
Quite recently, a Minister came to the south Yorkshire region and visited many constituencies including mine. The Under-Secretary of State for the Environment, the hon. Member for Surbiton (Mr. Tracey), visited the area. I wish that he was present in the Chamber now so that I could invite him to tell the House what he saw when he visited west and south Yorkshire. The day after that visit he was quoted in the press as saying that he was
deeply depressed by the experience and understood why people in coalfield areas thought that current spending on restoring the coalfield environment was not enough to solve the problem of unemployment and increasing poverty in such areas.
He was quite right. It is a great pity that there is no opportunity for the junior Minister to get that message to the Front Bench, especially the Treasury Front Bench which is not helping these people.

Mr. Cash: Does the hon. Gentleman agree that NCB Enterprise Ltd. has provided significant amounts of money in the area which are facing difficulty. Has his area not received any money?

Mr. Barron: I do not know of one job which has been created in the Rother valley as a result of the work of National Coal Board Enterprise Ltd. The unemployment level in my constituency would account for over 50 per cent. of the jobs that will be created by the enterprise board by the end of the financial year. However, that board was set up to look after problems nationally and not just in my constituency but neighbouring constituencies. Some areas have far worse levels of unemployment than my constituency. Money is not being directed to these areas.
Many of today's speeches have concentrated on how the economy is expanding but we are talking about getting money into areas which are in desperate need of help. The level of unemployment is unacceptable to the Labour party and, I hope, to members of the Conservative party. What is more unacceptable is that more than 30 per cent. of a generation of young people between the ages of 16 and 24 in the south Yorkshire region are being denied the right to go to work and are denied the right to be brought up as we were in years gone by.
I agree with the right hon. Member for Taunton (Sir E. du Cann) that it is not a question of economics or economic philosophy but a question of people. People are in need in Britain not just in the north but in the south-east and south-west. The Government must change course and direct resources to these areas.

Mr. David Howell: Earlier in the debate the right hon. Member for Glasgow, Hillhead (Mr. Jenkins) called in aid the independent commentators and financial market analysts who he said had been confused by the recent path and progress of policy. However, I believe that those who ended up with most egg on their faces after the last six weeks of policy were precisely those independent commentators and analysts. They have made fools of themselves in predicting and sometimes hoping about what would happen.
The market analysts believed that the short-term interest rate was bound to go up 4 per cent. — they


believed that it was only a matter of time—and some of the less ambitious put the level at 2 per cent. The general overwhelming consensus of so-called market opinion—I say so-called because it is the opinion of those who get their views projected by the media through their grumbles—was not the genuine reflection of opinion at all. These analysts were determined to prove the Chancellor wrong and somehow talk interest rates up to stratospheric levels. My right hon. Friend the Chancellor was being judged on absurd standards by some of the market commentators, and some right hon. Members, including the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley).
My right hon. Friend was right to delay the move on interest rates until he did. His timing was precisely right as it enabled the whole strain to be taken by a 1 per cent. increase. He nearly succeeded against the advice of the so-called experts in seeing us through this period with the entire strain being taken by the exchange rate without any interest rate increase. When it turned out that their forecasts were wrong, they dreamed up all manner of excuses such as Sheikh Yamani, the Bundesbank and everything else. The basic assessment of people who thought that sterling interest rates would roar up by 4 per cent. was wholly wrong. Their assessment was wrong for an interesting reason which is useful to consider.
The weakness of these analysts is that they think too much about domestic aggregates. To an extent they are led on by Ministers of all Governments who tend to talk in terms of what they can control on their home ground. In reality there is no real effective control of either the Keynesian aggregates or the monetary aggregates—all of which have proved enormously unruly. We have a wider open economy washed by enormous movements of capital and finance—£90 billion passes every afternoon through the London currency markets. Yet it is against that sort of background that some policy makers seriously believe that the Chancellor is in a position to influence the monetary aggregate in one direction or another and that he is magically responsible for these international forces. That is naive.
The Chancellor has to be totally flexible—more than the Chancellor of three or four years ago, let alone 20 or 30 years ago. He has to be ready to use interest rates, exchange rates and the cash reserves with great agility and inevitably, in a way which constantly changes. Those who argue that the policy is not clear or has changed, or complain that movements have changed over the weeks are absurd and are like those who in a rowing boat in a storm would complain when the oarsman changed direction to avoid being drowned by a wave.
In the past six weeks a great deal has emerged about the way in which our economy and aggregates operate. We have successfully got through a difficult period of pressure on sterling arising in some degree from reasons which had nothing to do with sterling. At the end of it all I agree that we are very exposed currency—about that there can be no doubt. If we do nothing about this and postpone the inevitable decision to join the exchange rate mechanism we shall fall under the gravatational orbit of the Bundesbank and that of the deutschmark. We should seek to resist that. We would do better to enter into arrangements which give us some say in the pattern of currencies in Europe rather than be left as a minor part of the deutschmark bloc. So I think we should get on with the inevitable membership of the European monetary system or exchange rate mechanism. I hope that my right hon. Friend the

Chancellor will prepare the way for action after the next general election. Then once the hothouse atmosphere of politics has cooled down the Government can join the European system when they have resumed office for a third term.
The other issue which has run through the debate so far is whether we have a choice between more public capital spending—my right hon. Friend the Chancellor has that choice—and lower taxes. Is that really what the debate is about? I believe that it is simply not the choice. I have never believed that there was such an intense choice between those two strategies. One reason for that belief was put clearly by my right hon. Friend the Member for Taunton, who reminded us that there is now substantial current infrastructure spending. Taxpayer-financed capital spending is roaring ahead. I should like there to be more in many areas.
The hon. Member for Rother Valley (Mr. Barron) correctly reminded us of the miserable, dismal and ghastly conditions in which many housing estates in some of our great cities remain. But my right hon. Friend the Member for Taunton further reminded us that the potential for such spending not just through public but through private finance — increasingly through private finance — is enormous and growing. That is not a fantasy being put forward by Conservatives in Britain—the idea is being adopted by Governments of all colours in almost every country.
Franchise financing is now beginning to be used for infrastructure and major public works throughout the planet and at last, we are doing it here successfully. My right hon. Friend the Secretary of State for Transport has at last persuaded the Treasury to drop its ridiculous arguments about crowding out and accept that the new bridge across the Thames at Dartford can be financed privately. It is a magnificent new infrastructure project and it is being financed privately.
We can go ahead with very much bigger infrastructure and enormous public works on the basis of new techniques for private finance. I hope that we adopt them. That leaves us room for substantial tax cuts as well. We have the resources to do both. They are essential because of the crucial effect that high taxes have on low earnings.
I do not understand Opposition Members, especially members of the Labour party, who do not seem to sympathise over the evil effects that big tax deductions have on pay slips, especially for people on very low earnings or people on pensions. It seems an utterly soulless approach and I plead with them to have a new look at the conditions experienced by some of their constituents.
Tax cuts are a major social priority, and they are a priority as well because they are a crucial element in job disincentives. Anybody who has seen how pay slips are reduced by national insurance contributions and tax must realise that those reductions have a great deal to do with the lack of job opportunities. They deter people who long to go to into work from taking a job.
It is questionable, too, whether tax cuts reduce revenue. We have evidence, on which my right hon. Friend the Chancellor touched this afternoon, to show that, at the higher levels, the more we cut taxes, the more revenue we get. That is what has happened under the present Government. We have halved capital taxes and doubled the revenue. Perhaps tax cutting produces more revenue,


which can be used for the social purposes that Opposition Members so often advocate. It beats me why they regard tax cuts as so dreadful.
Countries all around the world are cutting taxes. The United States is doing so and Japan and Germany are thinking about it. Those nations understand that lower taxes means lower costs on industry, more jobs, more choice, better opportunity and better social conditions for families. We would be crazy not to follow suit.

Mr. Eric S. Heffer: I wonder what Sir John Nott, the chairman of the merchant bankers Lazards, who doubled his salary last year to £366,436, would do with his tax cuts. I wonder about the others.
He was among hundreds of top City staff earning six-figure pay packets even before the Big Bang, according to a report published today …
24 directors and nine employees earned more than £250,000 a year. Another 361 directors and 667 employees in 42 companies earned more than £100,000 prior to the summer round of recruitment.
So reports this evening's edition of the London Standard.
I am not against tax cuts, but I often wonder what happens with tax cuts for people in high income brackets. Presumably they have another holiday abroad, for example. In the meantime, my people, like those about whom my hon. Friend the Member for Rother Valley (Mr. Barron) spoke, suffer massive unemployment and continue to live in bad housing where the drug problem is increasing and where there is despair among youth because they do not have jobs. They would like to be earning some money so that they could get some tax cuts.
The right hon. Member for Taunton (Sir E. du Cann) made a telling point. He said that he believed more in people than in economic theory. That seemed to bring him right up against the Chancellor who said, as he always does, that the Labour party, when in power, doubled unemployment. I do not deny that unemployment increased from 2.6 per cent. to 5 per cent. between 1974 and 1979, but, in May 1979, 1,218,000 people were unemployed, and within three years, to October 1982, the number had increased to 3,049,000. That is a large increase in three years.
It is indeed people, the unemployed and their families, who matter. The hon. Member for Wycombe (Mr. Whitney) mentioned strikes, but if people do not have work, they are hardly likely to go on strike—there is nothing to strike about. The Govenment's trade union legislation and unemployment have been used to discipline workers who still have jobs and to weaken the power and strength of the trade union movement.
Unemployment has another effect, especially in conjunction with high interest rates. In areas such as mine, which have high unemployment, one can go down streets of council houses which people bought because they thought that it was a grand thing to buy their house, and accepted the Government's policy, where there are a dozen or more "For Sale" signs. Because of unemployment, people cannot pay their mortgages. That is what unemployment and the Government's economic policies mean.
Of course, some people have done very well. I have mentioned a few who have done very well indeed out of the present economic system. I support the Opposition

motion. If I have any criticism of it, it is that it does not go far enough. It does not say what we intend to do. I have probably been involved in every economic debate since I came to the House 22 years ago. We always get involved in great arguments about the best way in which to run the existing economic system.
The time has come to stop arguing about the best way to run the economic system. The time has come to change the economic system and get rid of it. We should have the principle of co-operation, working together rather than being in competition man against man, woman against woman, employer against employer and industry against industry. We need to have an entirely new concept if we are to begin to deal with the economic problems. I accept that all Conservative Members, and some Opposition Members, although those I am referring to are never here, would not agree with me on that concept. I am not talking about a command economy with which the right hon. Member for Leeds, North-East (Sir K. Joseph) used to frighten the life out of everybody, believing that we wanted an east European type system. We have never argued for that. We must have greater planning of the resources of our country and we must have greater control of our industry. We must also concern ourselves with the planning of our exports.
I said that I thought the speech of the right hon. Member for Taunton was excellent. However, I do not agree with him when he talks about setting the builders free. I want private builders or any other builders to build the houses, schools and roads that are required. However, we still have to do that with some measure of planning for, financial assistance and aid and it has to be paid for through the Government and local authorities. That is not feather bedding. That is putting people to work on the basis of seeing what the people need and planning the resources properly in order to deal with those needs.
That is the issue with which we are faced. If we do not do that, we will sink even further into the mire. The thought of another five years of government of the type we have had since 1979 fills me with absolute horror. For example, some Labour and Conservative Members are going up to Knowsley. Let them look around the areas where the factories used to be and see what has happened to them. Many of those factories are now closed. Those assets have gone. It is not like it used to be even in the 1930s. The factories closed down then, but they could be opened up again. We have reached a crucial stage. I support this motion but, my goodness, I believe that we must go much further, much faster and much more resolutely than at present.

Mr. Mike Woodcock: Quite rightly, we have heard a great deal about job losses and oil. I represent a constituency which is not very different from that of the hon. Member for Liverpool, Walton (Mr. Heffer). It has many similar problems. However, no doubt he will realise that my view of the reasons for those jobs losses is not the same as his. It is an industrial constituency which has a large motor vehicle plant. It has the nation's only nuclear enrichment facility, a massive chemical complex and the country's largest oil refinery. Last week, we reached something of a milestone because when that refinery announced a further 700 job losses, it brought the total of job losses in my constituency over the past six years to a staggering 7,000.
During the 1960s, my constituency was booming. Vauxhall Cars established its second United Kingdom factory. A large oil and chemical complex was created and we had massive investment in housing and infrastructure. many people from Liverpool and the west midlands moved to the area because of its relative prosperity. I regret to say that, by contrast, during the 1980s we have had major problems and major job losses. Burmah Oil closed its refinery, Bowaters closed its paper mill, Vauxhall Motors shed 1,200 jobs, Associated Octel — makers of lead additives—cut back on workers as the world began to decrease the amount of lead in petrol. British Nuclear Fuels Ltd. reduced its staff by 600. Only last week Shell announced 700 further jobs losses on top of the 1,000 job losses last year, effectively bringing the work force of the nation's largest refinery down from 3,400 to 1,700 in less than two years. Even as I speak, a threat hangs over a further 300 jobs at the plant of UKF Fertilisers. As I said, there have been 7,000 jobs losses in six years, with hardly a family in my constituency unaffected.
It would be tempting to say that the job losses are the result of the Government's economic policies. Many Opposition Members would argue that that is the case. Many local politicians invariably argue that what is happening in my constituency is a direct result of the Government's economic policy. They say that the Government should pump in more taxpayers' money and that they should introduce import controls and increase regional aid. Those actions are not solutions. They avoid the economic reality.
I shall look at the genuine background to the 7,000 job losses in my constituency. The reality in the oil industry is that the demand for oil products has decreased by 30 per cent. There is a massive over-refining capacity in Europe and all of that has brought about much greater competition. My constituency entered this phase of greater competition with the largest United Kingdom oil refinery and one of the smallest. Neither was in any way competitive in international terms. Burmah, the smallest refinery, quickly closed, paying the price for being uncompetitive. It closed its doors for good in 1981, and now stands empty and derelict as a reminder of what happens w hen industry fails to adapt and improve.
The larger refinery, rather belatedly, took note of an independent assessment which showed it to be one of the most inefficient refineries in Europe in terms of manpower utilisation. That inefficiency was brought about by a set of factors which were endemic in British industry in the 1960s and 1970s. Those factors included restrictive practices stemming from over-powerful trade unions which prevented necessary change, weak management which failed to face up to the challenge of a new economic environment, and a regional grant structure which subsidised inefficiency and led to increasing uncompetitiveness and nearly led to the permanent closure of Britain's largest refinery.
The choice for that refinery was stark — either become efficient or go out of business. I am pleased to say that the company and the work force chose to face reality. The result has been the tragic loss of 1,700 jobs, but we now have a refinery with a bright future which has secured £400 million worth of new investment.
The reason for the job losses was not the Government's economic policy, but the sort of policy advocated by the Opposition. Those policies would have led to the extinction of that refinery. The present policies, although

painful, have led to long-term survival. Similarly, job losses in Vauxhall Motors and Bowaters paper mill were brought about by the lack of competitiveness and poor industrial relations. The Vauxhall site in my constituency could have been the centre of General Motors' expansion in Europe. Instead, because of appalling industrial relations, those investments went to Germany. The acres of unused land stand as a monument to the poor industrial relations of the 1960s. Vauxhall is now producing more competitive products.
In both cases, the answer was to face competition and produce the right product at the right price. That is the only meaningful response. That is what the Government are advocating. By contrast, the Opposition continue to preach protectionist policies. Yet even that fundamental belief in protection did not prevent the Opposition spokesman on trade and industry from arriving at the Vauxhall plant in my constituency recently in a Nissan car provided by the local Labour party agent.
In the nuclear industry the job losses that we have sustained have occurred because of increased efficiency. The development of the centrifuge process of uranium enrichment has inevitably led to job losses. It is inevitable that as the world becomes more competitive, as stocks of fossil fuel become exhausted, and as we realise that fossil fuels are more valuable as a chemical feedstock than as an emergency source, we will have to rely more and more on nuclear power.
As industry gears up to face the challenges of the 21st century, what do the Opposition propose? They propose phasing out nuclear power and returning to an overdependence on coal. They propose a return to the days when the National Union of Mineworkers held the country to ransom. As the Confederation of British Industry stated only this week, the rejection of the nuclear option will mean slower growth, reduced competitiveness, higher unemployment, higher costs and lower living standards.
The job losses in my constituency are not the result of the Government's economic policy. They are the inevitable outcome of years of restrictive practices, overmanning, unreal jobs, uncompetitiveness, Government subsidies, indecisiveness over the future of nuclear energy, overtaxation of industry and overspending by local authorities, all of which were encouraged by the Opposition's economic policies.

Mr. Barron: Will the hon. Gentleman give way?

Mr. Woodcock: I will not give way, because I have only two minutes left.
By contrast, as a result of Government policy I now have an oil industry in my constituency that is secure and efficient; a car industry that can beat any competition; a nuclear enrichment facility that is a major foreign earner; a new paper mill that is achieving production levels that were never dreamt of before, an industry that has more to invest after tax and which is now investing for the right reasons and not the wrong reasons. We have an enterprise economy that is producing hundreds of new firms that will grow and provide thousands of new jobs.
We all know that we need more jobs, but the only jobs that are worth having are real jobs that come from a competitive and efficient industry. What my constituency and this country needs is not the dreadful policies of the Opposition, but another seven years of the Government's economic policy.

Mr. James Lamond: Page 25, paragraph 61, of the autumn statement reads:
Throughout the current financial year growth in £M3 has been above the target range in the MTFS, with growth in excess of 18 per cent. in the year to mid-September. In part this has reflected the increased attractiveness of interest-bearing bank deposits relative to other retail deposits. PSL2, which includes most of these other deposits, rose by 14 per cent. during the year to mid-September.
I have to tell you, Mr. Deputy Speaker—and you know Oldham as well as I do—that in my constituency of Oldham, Central and Royton very few people will get their hands on the autumn statement, and of those who do there will be fewer still who will understand the paragraph that I have just quoted. However, despite the complacent boastings of the Chancellor of the Exchequer at the Dispatch Box this afternoon about the improvement in the economy, so many years of continual economic growth, and the million jobs that he claims to have been able to create since 1983, the working people of Oldham understand only that since the Government came to office their position has gradually deteriorated.
No matter where we look in Oldham, that is the case. If people want a job, they have to face the fact that 8,000 men and 4,000 women are registered unemployed in the town. At the jobcentre there are 508 vacancies for 12,000 unemployed people.
It may happen that someone in Oldham might want hospital care for his mother. Perhaps she has a cataract that needs attention. That person will be told at the local hospital that of course his mother needs treatment, but the waiting time is two to three years. However, if the mother has £1,800 and wishes to pay, she can have a private operation the following week. Arnold Broadbent and his wife, or Kevin Clegg and his wife, who do not have £1,800, cannot understand how the Chancellor can be so complacent about these matters.
Perhaps someone's son or daughter is to be married soon and needs a house. Perhaps they may be able to buy one of the splendid little houses that are still for sale in Oldham for £20,000, or they may want a council house. Of course, as soon as they try to borrow money on a mortgage to buy the house, they find that the rates have increased steadily during the time that the Government have been in office. Contrary to the claims that the rate of inflation is falling, they would have to pay more for their mortgage than they would have paid one month ago. They ask how that can be squared with the Chancellor's claims.
No matter where we look—at jobs, housing, health or education — we find that matters have deteriorated since the Government came to office. Yet time after time the Chancellor makes his claims from the Dispatch Box. He has claimed that jobs have been created. I would not want to be unfair to the Government. Of course jobs have been created in Oldham in an attempt to make up for the famous firms that have gone to the wall. Platts International, the textile machinery firm which was famous throughout the world, disappeared. Indeed, textile mill upon textile mill has disappeared.
Oldham metropolitan borough council has been trying to create jobs. It is one of those much maligned bodies— the local authorities — which the Government have lost no opportunity to deny funds. During the whole of the Government's term of office Oldham metropolitan borough council has tried to step in and do the job that

any decent, self-respecting Government would have done. It has tried to encourage people to come to Oldham, and it has been successful, but without much encouragement from the Government. The council has tried hard to make up for the drop in jobs. It has been successful, but not successful enough to enable the Chancellor to stand at the Dispatch Box, as he did this afternoon, and expect people to support him again at the next election unless he does something about his policy.
As my hon. Friend the Member for Liverpool, Walton (Mr. Heffer) said, the Chancellor must face reality and not suggest that there is nothing wrong, that his policy is working wonderfully, or that the fall in the value of the pound had nothing to do with him but is the fault of the City of London. We do not believe that for a moment.
With all the opportunities that the Government have had during their lifetime, such as the enormous revenues from North sea oil, which have not been enjoyed by our competitors—the Federal Republic of Germany, France, Spain and Italy—people of Oldham want to know why our currency, which is the measure of the confidence of the outside world in the future of our country, has fallen steadily against the currencies of other European countries.
How can it happen like that if everything is so successful? It may be that the Chancellor can produce statistics in the autumn statement which are difficult to follow for the man in the street, but all the statistics in the world will not convince me and the people of Oldham, and the many millions of other working people, that our country's economy is all right and that the Chancellor deserves another chance. He clearly does not.
There must be a solution—a very radical solution. I do not have time to go into that in 10 minutes, but I shall vote for the motion. I have every confidence that when our Government come into office, which may be within the year, we shall face a difficult task, but we shall resolutely tackle the most important matter of all, which is to get the unemployed back to work and create the wealth with which we shall be able to carry out the rest of our programme.

Mr. Richard Alexander: It is appropriate that at the end of a parliamentary Session we should be debating economic policy because it enables the Government and the country to take stock of what has been achieved and, of course, it enables us to explain what remains to be done.
The Official Opposition are on dangerous ground when they use the subject for one of their Supply days, because it enables their own policies as well as the Government's to come under much closer scrutiny. As the election draws ever nearer, the electorate will be looking not just at our record but at what the Opposition propose. For that reason all of us in the Conservative party welcome the debate.
The debate enables us to expose the frightening cost of the promises made by the Opposition over recent months. It is easy, in the heady atmosphere of one's own party conference—we have all done it—to say things that please one's own side, and to promise the earth. It is less easy to explain to the electorate in the ensuing weeks and months precisely how it will be paid for. It is even more difficult to explain to the electors that they, the electorate, will have to pay for those promises. Those promises, so


easily made, are now being costed. They will continue to be costed, and until the election is over and the Labour party has been trounced at the polls, we shall ram home the expensive nature of what it proposes.
The Opposition will, of course, point to the unemployment figures and compare them with the figures when they were in power. It is absolutely fair for them to do that as a political argument, but what they will not tell the electorate is that in 1979 this country was grossly overmanned in virtually every large industry, the Civil Service had swollen to figures hitherto unknown and inflation was approaching that of some of the South American banana republics. But for today's Opposition, the 1970s were the golden days. They were the days of financial irresponsibility, of spending more and more money, which had not been earned, but which had come from people's taxation or increased borrowing. They were the days of the gimmick and the cosmetic fix. They did more damage to stable, long-term employment and the value of people's savings than they care to admit. That is one of the many reasons why they were defeated in the 1979 general election.
We have seen Labour's economic policies in operation before. During the years of socialism our overseas economic debt doubled. It is a debt that this Government have had to pay, and are repaying. Spending on the Health Service was cut in real terms, although one would never have recognised it when one listened to some of the utterances by the Labour party, or the utterances of its Liberal and alliance partners, who have departed the scene of today's debate.
The Opposition, who posture before us today, promised before and did not perform. Now they promise more of the same medicine to the electors. They have the nerve to criticise this Government for what they have achieved. They offered, and imposed, nationalisation, with all the horrendous burdens that it brought for the taxpayer and the customer. They now call it social ownership, but the effect on the taxpayer will be just the same, and the change of a name cannot conceal their true intentions for the future of this country. Nor have they learnt anything from France's experiment in Socialism, yet today French men and French women cannot wait to get to the polls to turf out their Socialist masters and have done with that experiment. If this country were to follow the economic sirens from the Labour party, it would regret that. We would suffer as the people are suffering in some of the London boroughs that are under Socialism— Ealing, Lambeth, Haringey and Hackney. We would suffer the thought police that people are having to endure in Brent. We would have the economic drabness of Birmingham and Manchester.
The hon. Member for Liverpool, Walton (Mr. Heffer), who is not in the Chamber, said that he was not advocating an eastern European state in what he intended to say, but I would tell him now if he were here that that is precisely what would be achieved if his proposals came into effect.
The Government have nothing to apologise for to the Labour party. Inflation is lower than in any year under the Labour Government. Output is at the highest ever and is still increasing. Economic growth is higher than in any year under their Government. The economy, which is what we are debating, is sound, and the Opposition, for all their rhetoric, know it. The electors know it. That is why we shall win the next election, whenever it is called.

Mr. Willie W. Hamilton: I think that there will be general agreement that the biggest problem that all Governments have faced since the war has been to marry a reduction or containment of unemployment with controlling inflation. To get inflation down and at the same time keep employment up is the $64,000 question that has never been answered by any Government since the war. The present Government make a great boast of the way in which they have reduced inflation. If one takes the bare statistics, they are impressive. The annual rate of inflation when the Labour Government went out of office in 1979 was 10 per cent. That figure is hardly admitted by the Government.
It has subsequently gone down, although it rose rapidly in 1980 as the direct and immediate result of the Government's first Budget, when VAT was doubled, contrary to the promises that they made in the election campaign.
Leaving that aside, it is true that the figure is now about 3 per cent. That has little to do with the Government's policies. The violent fluctuations in prices in the 12 years since 1974 have been due not so much—in fact, hardly at all—to the Government's policies, as to the rapidly fluctuating prices of the raw materials upon which our industry is based, and especially the price of oil.
I should like to put on record some figures that I got from the Library. Between 1973 and 1979 the United Nations world export price index of primary products, excluding crude petroleum, went up by 62 per cent. That increase in raw material prices took place mostly in the lifetime of the Labour Government. In the same period, crude oil import prices rose by 600 per cent. A vast amount of our industry depends on oil for its supply of energy. Between 1973 and 1979, the retail price index reflected those prices and rose by 140 per cent. That frighteningly high rate of increase was primarily due to the escalating prices that we had to pay for our raw material imports, and especially for oil. In comparison, between 1980 and 1985, raw material prices went down by 23 per cent., as against the increase of 62 per cent. in the lifetime of the Labour Government. Crude oil import prices between 1980 and 1985 rose, not by 600 per cent. as under the Labour Government, but by a little over 50 per cent. In the same period, the retail price index rose by 67 per cent.
The achievement suggested by those figures had very little to do with the Government's policies, or with the North sea oil bonanza, which was not created by the Tory party, although the Prime Minister might try to convince the people that it was. The fact is that the Government have had the bonanza of £53,000 million in oil revenues since 1979.
In 1985 alone, the Government got £11·5 billion. or almost £1,000 million every month from North Sea oil revenue. Every penny of that £11·5 billion has been squandered. The revenue collected last year from North sea oil can be compared with the £20 billion that was paid out in dole money, unemployment benefit and lost taxes. So oil revenue paid for just about half of the dole money that kept 4 million people kicking their heels in idleness, instead of giving them gainful employment. If we had invested that money instead of spending it on unemployment, we could have modernised our industry


and our infrastructure — our roads, schools, hospitals, houses and communications system. The economy would have been in a much better state than it is now.
Despite what the Chancellor says, manufacturing investment in our industry today is one sixth what it was in 1979. Since 1979, £96 billion of British money has gone abroad and has been invested in modernising industry abroad. We are getting more and more imports because as our industry declines it becomes less and less modern. Our money is financing the modernisation of industry abroad and so imports sweep into this country. I challenge anybody in the House or elsewhere to say that he does not have something Japanese, Italian, German or whatever, in his garage or house, for example a television set or radio.
That is a sad state of affairs and the results of it are seen in many ways. The Government should understand that, unless they dramatically change their policies, the situation will get worse. For example, the attention of the House has been drawn to an article in The London Standard this evening about the colossal salaries that are being paid in the City and in big business. Sir John Nott, a former Secretary of State for Defence who was also at the Treasury, used to lecture ordinary workers on the importance of restraining their greed when asking for wage increases of £3 or £4 a week. As the chairman of merchant bankers, Lazard Brothers, he doubled his salary to more than £366,000 last year. That is not exceptional, many people in big business in Britain make that sort of colossal salary. So the Government should not lecture ordinary workers about their greed in wanting an extra £3 or £4 a week to maintain a reasonable standard of living for their wives and families.
The big complaint about this Government is the gross unfairness and injustice of their policies. I compare Sir John Nott's salary of £366,000 with the figures given in an article that appeared in The Times a few months ago:
A big increase in employment of school leavers in Britain's hotels and restaurants, at weekly wages of between £35 and £40, is now expected after the reform of the wages councils.
Those wages will be reduced by £20 a week as a direct consequence of the Government's abolition of the wages councils. The Government want an increase in service jobs —in hotels and restaurants—where those kids will be fully employed and taken off the dole queue at a wage of between £30 and £40 a week. People in the City are earning £100,000, £200,000 or £250,000. Such are the figures paraded in the City.
The British people are seeing through this gross unfairness and will vote against the injustices which will be perpetrated and extended by the Government if they get the opportunity at the next election. The British people have rumbled the injustices and unfairness, the vastly increased unemployment and the likely prospect of their continuing increase. The people will say, "Get the hell out of it," at the next election, and a damned good thing too.

Mr. Michael Fallon: I shall vote for the amendment this evening and nothing that I say now should be taken as anything other than wholehearted support for the Government's economic policy.
I hope my hon. Friends will accept that no economic policy can be considered entirely successful if all cannot

share in its success. One group especially has not yet fully shared in the success of our economic policy, and it should now be enabled to do so. I refer to those who are on less than average earnings and who, at the moment, bear a quite penal burden of taxation.
Let us be clear about how many people are involved. About 8 million people in Britain earn less than £7,000 a year. Some 4 million, even on official Government definitions, earn less than 140 per cent. above the supplementary benefit level. Some 500,000 people receive family income suppolement. All those people have to pay tax at 29 per cent. That is a lot better than paying 33 per cent. tax, and a lot better than having to pay some of the tax rates that will be necessary if the Labour party ever comes to power, but those low-paid people are paying tax at a rate of 29 per cent.—a rate higher than the top rate of tax in the United States next year. Moreover, they must pay it at a starting point very much lower—at one of the lowest points in the Western world. They must pay 29 per cent. tax as soon as they start earning £2,300 a year. A person would not pay 29 per cent. tax in the United States at the moment unless he earned £17,000 a year.
It is not possible for the Conservative party to promise to increase the living standards of the low-paid, those on benefits who are being taxed, and the 40 per cent. of pensioners paying tax, except by reducing the burden of taxation upon them. Therefore, I have to say that I am disappointed that in the autumn statement we heard this afternoon we did not get any clearer idea of the scope that is available for those tax cuts for low-paid people in the Budget next year or of a medium-term taxation strategy for bringing down the basic rate of tax to well below its present level of 29 per cent., and indeed, for devising a much lower base rate for the low-paid in our society.
It should be obvious to everybody that such deep cuts in taxation will not be possible without substantial reductions in public expenditure. We must ask ourselves, after a series of autumn statements in which public expenditure has slightly increased from year to year, perhaps not as a proportion of GDP, why it has been so difficult for my right hon. and hon. Friends to achieve the reductions in public expenditure which they have honestly and earnestly sought.
There are three reasons why they have so far failed to make substantial reductions in public expenditure. The first is the public expenditure system itself. The system remains constructed, despite all our endeavours, on the basis of political entitlement rather than on the basis of pure economic and social need. We have only to look at the details in the Estimates to see the extent to which that political entitlement is reflected in over-provision in the Scottish and Northern Ireland blocks, in the dominance of defence procurement spending and in the sacrosanct nature of spending on agricultural support.
It is not simply the system that is at fault. We do not fully understand why the PESC survey and the Star Chamber do nothing to eliminate that political entitlement, but actually consolidate and perpetuate those entitlements by refining them and matching them, and eventually attempting to reconcile them.
Secondly, built into the public expenditure system is a massive proportion of expenditure on public sector pay, allowances and pensions. Some 60 per cent. of all public expenditure, nationally ordained and laid down, is somehow elusively outside the control of the Treasury and my right hon. Friends. It is controlled by agencies which


stand between the Government and spending on the ground. It should be obvious now to everybody that there are only two courses to take: either we bring such public sector pay within the full control of the Government—as indeed we are proposing to do with teachers' pay—or we devolve it to local bodies which can effectively reflect the real economy in our regions and make the necessary adjustments.
The third reason why it has been so difficult to reduce public expenditure is the benefit system and the extent to which it is simply demand led. I am not suggesting that our benefits are too generous. They are open-ended, and they are non-motivating in that they help to perpetuate dependence on the Giro, but, nevertheless, the extent to which they can continue to upset our public expenditure reviews is well brought out in paragraph 22 of the autumn statement that we heard today. There can be no finer indictment of the difficulties that we face in trying to control public expenditure than the wording of paragraph 22.
In conclusion, I must tell my hon. Friends that, despite their best endeavours, it is clear that we have not yet been able to refine and reform the system to achieve the sorts of reductions that we need in public expenditure to finance the necessary and permanent cuts in personal taxation that are essential if all are to share in the enterprise and success of our economic policy.

Mr. Seamus Mallon: I find this a very depressing debate, as indeed I am sure most people find any debate on the economic situation. But I find it depressing for a different reason. If the Chancellor of the Exchequer was as good as he says he is, and if any future Chancellor of the Exchequer were to be as good as he thought he might be and together they were given a magic wand, and if I spoke in the debate on this subject in a year's time, I should be facing the same problems. If that magic wand worked, and if the analyses and strategies that we have heard here today were all correct, I should still be facing a structural problem which would leave the area where I live and which I represent at a disadvantage in comparison with the rest of the people represented in the House.
That structural disadvantage is that while we are part of Britain politically, we are not of Britain. We are an offshore island of an offshore island. We are given parity when it suits the Establishment here, and we are denied that parity when it may be of tremendous advantage to the people in the north of Ireland. For that reason, I must draw attention to Northern Ireland's unique position in that regard and address my remarks not just to the Government but to previous Governments and to future Governments. Our problems did not start with this Government; they started long before they took office and will continue for as long as that structural problem remains.
It is even more important to set the matter in the context of the whole of the north of Ireland. I shall resist the temptation to speak exclusively about my constituency. I do not claim to speak for the 1·5 million people in Northern Ireland, but I hope that I speak on their behalf. The region is suffering more than any other part of the United Kingdom under the jurisdiction of the House in economic, human and social terms. In my constituency alone one person in four people is unemployed. Thirty-two

per cent. of public sector vacancies advertised are community programme vacancies, as opposed to 14 per cent. in the rest of Britain. That tells us something about that type of programme and the demand for it. Forty-four per cent. of the population are under 25, and almost 30 per cent. of them are out of work. In a politically volatile situation, that surely is a recipe for disaster. Sixty-six per cent. of the population who are employed are in public services. That gives some idea of the deficiency in other areas of employment. The most startling fact of all is that Northern Ireland is the only region in the EEC where more people are unemployed than are working in the manufacturing industries. That is frightening, and is worth thinking about.
A similar phenomenon is present in the wages structure., in that there is also a lack of parity. The wage rate for males in Northern Ireland is 89—9 per cent. of that in the rest of the United Kingdom. I agree with what has been said about the pittances for which young people work because they are not protected by wages councils. In Northern Ireland only 10 per cent. of young people have contracts of employment. They are being used, and that position will blow up. Unemployment now officially stands out 22—3 per cent. It is even more startling that 11,700 more people have become unemployed in the past 12 months. Of those, 50 per cent. have been out of work for more than a year.
When those statistics are added up, they reveal a human tragedy which suggests strongly that the position in Northern Ireland is unique and that it must be considered differently from the rest of the United Kingdom. I repeat that even if the Chancellor of the Exchequer had a magic wand those problems would still have to be faced. Irrespective of a possible upturn in the economy, those deficiencies will remain.
The unemployment gap in Northern Ireland differs from that in the rest of the United Kingdom. During the past 12 months, male unemployment in Northern Ireland has risen by 9·;8 per cent. My figures are taken from the annual report of the Northern Ireland Economic Council, which was published this week. That increase in male unemployment is startling compared with the increase for the same period in the rest of the United Kingdom. Again, that shows a disparity that is not made up through benefit or social security. That must be considered.
The construction industry is crucial to Northern Ireland, yet 2,500 jobs have been lost during the past year. If that loss of jobs is not halted now, half the jobs in the construction industry will have been lost by 1990.
The most serious position can be seen in agriculture. Northern Ireland has only two natural resources: people and grass. Agriculture is approaching a crisis, and many people would say that it has already reached it. The food processing industry is now almost non-existent in a country that produces beef, milk and a limited amount of cereals.
The Government should give their full support to the proposed EEC study of an integrated rural programme for Northern Ireland so that all the attendant problems in agriculture in Northern Ireland can be dealt with. They must be dealt with because Northern Ireland farmers now receive 48 per cent. below the 1984 farm income level. Farmers are receiving almost half what they received in 1984. Do not take my word for it. Take the word of the


Northern Ireland Economic Council. The farm labour force has dropped by 2 per cent., which is understandable with such returns.
The Government have treated Northern Ireland farmers very unfairly over the milk levy system, because none of the special EEC allocation of an extra 4—5 per cent. quota in 1984 came to Northern Ireland. The small producer in Northern Ireland does not receive the same level of quota as the small producer in England, Scotland and Wales. The Government cannot have their cake and eat it. This Government, or any Government ruling Northern Ireland, cannot continue with this unfair system of parity when it suits them, but not when it does not suit.
I began with a reference to the report of the Northern Ireland Economic Council, and I shall also finish with one, as it contains some constructive suggestions. I turn, first, to the restoration of a housebuilding programme, with increases in new buildings and rehabilitation. Expenditure on new build in Northern Ireland is £60 million, while expenditure on refurbishing stock is £58 million. The difference between the money spent on rebuild and on refurbishing is £2 million. That tells us something.

Mr. Deputy Speaker: Order. The hon. Gentleman is approaching the 10-minute limit.

Mr. Mallon: I shall not continue, Mr. Deputy Speaker. I shall leave it to hon. Members to analyse the position in Northern Ireland, and I hope that they will consider my suggestions.

Mr. John Maples: Today's debate has been somewhat overshadowed by the autumn statement, but I wish to spend some time talking about interest rates and why I think that Britain is suffering from a very high level of interest rates. I shall offer a perhaps somewhat unusual explanation.
The inter-bank rate in the United Kingdom is 11 per cent. Most borrowers have to pay interest of between 12 and 13 per cent. With inflation at 3 per cent. that implies a real interest rate of 10 per cent., which is obviously extremely high. When that is contrasted with interest rates of 4·5 per cent. in West Germany and in Japan, 6 per cent. in the United States, and 7·5 per cent. in France, we must ask why there are such high rates in the United Kingdom. Several reasons have been advanced for that, such as the United States' deficit and the exchange rate, but the reason that I offer has nothing to do with those factors. It is a largely domestic factor.
Let us consider interest rates as the price of money and accept that the price of any commodity is affected by the relationship between the demand for it and its supply. In the context of interest rates, one can think of the relationship between the demand for credit by borrowers and the supply of savings from the economy. If there are consistently double digit interest rates, one can draw the fair conclusion that demand for lending and for credit is excessive in relation to the supply of savings. One must ask why that should be. After all, one would expect the two things to make a fairly neat balance.
A fairly convincing explanation is the liberalisation of the banking system during the past 10 years or so, and the extraordinary way in which the banking and credit industries in this country, and in other countries, but

especially in the United Kingdom, have arranged new ways of lending people money. There has been an enormous increase in credit cards, in mortgage lending by building societies, and now also by banks, much of which leaks into consumption. There has also been an enormous increase in hire purchase, personal loans, and all forms of credit. All these forms of lending money have expanded considerably.
It can never have been easier to borrow than it is now. That comes back to the banking system and the way in which it operates. It used to be a system for saying no. If one asked one's bank manager 20 years ago for a loan, the odds were that he would have said no. Now bank managers say "Do you not want more?" They are almost selling loans to people. Indeed, they are inventing ways of creating lending and of expanding their own activities. That makes perfectly good sense to them, but it results in the extraordinary boom in lending that has occurred. Perhaps one of the bad things about that boom is that the banks have concentrated on the personal and property sectors, at the expense of others.
Let us consider the lending offered by the big banks during the last five years. I shall pick one example, but it could well come from any of the big banks. The loan portfolio growth for the five years from 1981 to 1985 has risen by 33 per cent. in lending to manufacturing, 94 per cent. in lending to financial services and distribution, 120 per cent. in lending to construction businesses, 170 per cent. in lending to property companies and a staggering 215 per cent. in lending to individuals.
The reason for it is that the big borrowers — the personal sector and property companies—are not very sensitive to high interest rates. Banks can increase their lending to them, and they are willing to pay higher interest rates. Individuals are usually concerned about the amount of the monthly payment and whether they can meet it, and not about the theoretical interest rate. Someone involved in a relatively short-term property deal does not mind paying high interest rates for a short time. On the other hand, if a manufacturing company is making a long-term investment, the decision is very different.
I suggest that banks, by their own activities, have swelled the volume of lending by persuading people to borrow more money. They have done so above the rate at which the economy normally supplies savings. The banks have therefore had to raise interest rates to bid back from the economy the savings that they need for funding. The only way they have been able to obtain those savings is effectively by raising interest rates.
Technically, that is done on the inter-bank market, although it is not necessary to go into that. However, it is a fallacy to think that this procedure works in reverse and that the bankers are sitting in their offices waiting to see how much is taken in in deposits before deciding how much they can lend. I do not believe that that is what they do.
The consequences of what I am saying are illustrated if one compares what is happening here with what is happening in West Gemany. In West Germany, bank lending is increasing at about 5 per cent. a year and the interest rate is about 4·5 per cent. In the United Kingdom bank lending is growing at more than 16 per cent. a year and our interest rate is 11 per cent. That confirms my view that the expansion of bank lending and the activities of the banks have almost of themselves driven up interest rates. They are certainly a substantial factor.
While the people at whom the banks have targeted their lending are not sensitive to interest rates, important parts of the economy are, particularly manufacturing industry. If a manufacturing company is thinking of making a fairly long-term investment in new plant or a factory, borrowing money at 13 per cent. for five or 10 years is a fairly terrifying prospect. One would want to be sure of achieving returns of around 20 per cent. before being prepared to enter into that type of loan commitment. Very often it is decided that the risks simply do not justify the cost, and that has an effect on manufacturing investment. That is shown, not just in the manufacturing investment figures, but in the amount of big bank lending to manufacturing companies.
The bad consequence is not just that investment by industries that cannot afford such high interest rates is effectively discouraged. There are other consequences. High interest rates devalue current assets and encourage takeovers. It is often more profitable and easier to buy existing assets on a devalued basis than to invest in new plant and equipment. That leads to a short-term view of investment opportunities, for which the City is often criticised. If one can get 10 or 11 per cent. by leaving one's money in the bank or by lending it to the Government at virtually no risk, it is not surprising that investment managers take short-term views.

Mr. Cash: Does my hon. Friend accept that manufacturing investment has increased since 1983 by as much as 25 per cent.?

Mr. Maples: I do accept that, but the bank lending figures speak for themselves. Although I am glad that manufacturing investment has recovered over the last few years, it is still down on what it was before 1983.
One of the other consequences is that because the City and the financial markets look at credit expansion figures, that of itself is a weakening factor on the pound. The raising of interest rates to protect the pound is simply the treatment of a symptom. In my view the same credit expansion is causing both the weakness in the pound and the growth in interest rates.
We are also seeing a very dangerous level of lending to the personal sector, and one is now seeing increasing defaults on mortgages, credit card payments and hire purchases. Personal sector liability has risen from 50 to 85 per cent. of personal sector disposable income in the last five years, and that must be dangerous and worrying for credit and financial markets.
Perhaps the worst consequence is that most of this lending to the personal sector goes into consumption, particularly on imports. We have a peculiarly high propensity to import, and every month we seem to hear of record retail sales, record levels of manufactured imports and record levels of personal credit. I cannot help thinking that they go together.
If this is accepted as a cause of high interest rates and the things that flow from it, we must take some steps to restrain the growth of credit and these high levels of imports. We should try to channel some of this lending away from the personal sector and into productive investments in industry. The Bank of England and the Treasury have the power to achieve that end if they want to. If we do not do so, we shall continue to suffer high interest rates and their consequences for a very long time.
I hope that the Chancellor and his colleagues in the Treasury will give this some thought. It is not an original

analysis. It has been suggested by other people. However, it is not commonly propagated, and it is worth some investigation and action. If we take intelligent action to restrain credit growth, we could end up with lower interest rates, a stronger pound, a reduced level of manufactured imports and all the other good consequences that would flow from that.

Mr. Peter Hardy: I hope that the hon. Member for Lewisham, West (Mr. Maples) will forgive me if I do not follow him at length, except to say that welcome his comments about the effect of high interest rates, especially on manufacturing industry and job creation.
Like many of my hon. Friends, I am suspicious of economic indicators, and I am obliged to my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) for describing them as good luck charms. I am suspicious of economists as well.
Indeed, if the Chancellor looks at our historic development, he will see that the decline of the British economy is almost in direct relationship with the employment of economists in the public sector. Instead of indulging in the jargon to which my hon. Friend the Member for Oldham, Central and Royton (Mr. Lamond) referred, it might be better if the Chancellor let rip his natural instincts and operated, not as an amateur economist, but as a transient secondhand car salesman. In that situation, Britain might well be better off than it is now. The right hon. Gentleman might not then have made his reference to another good year, which will be seen as a foolish comment by everyone living above a line from Watford to Bristol. If the Chancellor and his hon. Friends think that people in the industrial areas of the north believe that the last five or six years have been good, they are deluding themselves.
My hon. Friend the Member for Rother Valley (Mr. Barron) referred to the unemployment figures. Today, the situation in our area is as bad as it is in the constituency of the hon. Member for Newry and Armagh (Mr. Mallon). Once relatively prosperous areas of Britain are now suffering the economic condition of Northern Ireland, bringing with it long-term ills, risks and perils for our communities. Does the Chancellor think that such communities can long withstand a situation in which the majority of their young people are unemployed? Does he consider that British industry can survive when, for example, the special steels industry in my constituency is competing against the French, who in direct aid provide between £4 and £5 a tonne, while the British Government are providing 56p per tonne? Can the record-breaking, highly successful and recently privatised special steels industry in my constituency compete when the Italian Government allow their steel industry to receive energy at 37 per cent. of the price that our people must pay for electricity for their electric arc furnaces?
It is no good the Chancellor talking about cheap nuclear power. That has nothing to do with it. The Governments in Italy, France, Germany and almost every other OECD country recognise that they cannot afford an arm's-length relationship with industry and that their own industries must survive — [HON. MEMBERS: "The Chancellor is not paying attention."] Of course not. The


Government are paying no notice. They are happy to see the young people of Britain blighted and our manufacturing base destroyed.
After six years, it is time that the Government did something about that. In the last 12 months there have been tremendous improvements in productivity in the coal industry, yet the Government cannot even perceive the logic of that achievement. When the CEGB sites its two new power stations on the south coast, it will not be required to ensure the shipping orders to enable the coal to be brought from the Humber or the north-east to feed those power stations. The Government will not even urge the CEGB to apply the logic of the research and technology carried out in Yorkshire on pressurised fluidised bed combustion. They will continue to say that the technology is not proven, although the Americans ordered two last month. We are at a pretty pass. For the Government to rely on the jargon which my hon. Friend the Member for Oldham, Central and Royton demonstrated to be stupid is no answer.
I ask the Government to consider the cost of unemployment and to recognise that for each young person in my constituency entering the youth training scheme there is a basic cost of £50 a week. If only we had spent half that money on sustaining British industry and preventing the disease which now affects us, instead of treating the symptoms, we would be a great deal better off.
In the past 12 months the deutschmark has gained 23·1 per cent. against the pound. We once made fun of the Italian economy. I wonder how the Italians see us now that the lire has improved 21·1 per cent against the pound. The franc has improved 17·6 per cent. against the pound. What is worse, those countries have not had the benefit and boon of offshore oil. There we have it. The Government have enjoyed the enormous benefit of offshore oil and have simply presided over the erosion of our industrial bases and the betrayal of areas such as mine.

Mr. William Cash: I congratulate the Government on their economic policies. During the past seven years the United Kingdom, through the Government's activities, has managed not only to survive the difficulties which were directly related to a period of appalling Labour government but to come through what can fairly be described as 40 years of terminal decline. The Government have provided the opportunity for the country to get back into contention with the rest of the world. That is a tribute to the quality of my right hon. Friends the Chancellor of the Exchequer and the Prime Minister. They have persevered with determination against the background of a serious world recession, such as was almost impossible to imagine in 1979 when they first came to power.
The speech of the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) substituted adjectives for policies. I am sorry to say that that is becoming increasingly characteristic of his speeches. The difference between the realism with which the Chancellor put forward his arguments and the third-rate, tawdry approach adopted by the right hon. Gentleman was a salutary lesson.
At the end of the day much of the economic performance of other countries depends, and has

depended for some time, on a number of important factors — savings, low inflation and investment. Against that background, the policies that we are pursuing are paying off with great dividends. On savings, we should look to the experience of Japan and the United States. One of the lessons that we had to learn was undoubtedly from the Japanese experience in the 1950s and the American experience in the 1920s. Tax-cutting policies provided substantial opportunities for their economies to take off and that enabled them to build substantial savings which in turn enabled them to invest in new industries.
In the early 1950s, Tashan Isabaki enabled the Japanese economy to take off and achieve the success that it has achieved over the past 30 years, despite the prognosis of the American adviser to the White House at the time that Japan was flat on its back with nowhere to go. The provision of incentives is the way to achieve enterprise in society. A main ingredient of the provision of incentives is to cut taxes, as the Chancellor and Prime Minister are proposing. That has great support from most of the British people, particularly from Conservative Members.
Manufacturing industry has increased by 25 per cent. since 1983, as I said in an intervention in the speech of my hon. Friend the Member for Lewisham, West (Mr. Maples). The importance of that is that, by providing the environment in which investment in manufacturing industry can increase, we are at the same time enabling our companies to engage in quality production. Over and over again we hear Opposition Members saying that we need to increase the volume of production. The right hon. Member for Sparkbrook said that today and the right hon. Member for Islwyn (Mr. Kinnock) said the same recently. That is wrong. We do not need to increase the volume of production of goods which people do not want or need to buy, especially if the quality of the goods is not sufficiently high. In an intervention in the speech of the right hon. Member for Sparkbrook, I pointed out that one of our great difficulties is that our industries are not achieving a sufficiently high quality. There are many other factors involved, but that is an important one.
The gravitational pull of the argument of the right hon. Member for Sparkbrook was that the Government were encouraging imports. The point is not that imports are being sucked in, but that the quality of goods from abroad is, regrettably, superior. We must take that point on board for the sake of the constituents of the hon. Member for Rother Valley (Mr. Barron) and others. I lived in Sheffield for 20 years and saw the industries decline. I knew many of the managers and people who worked there and I have great sympathy for the predicament in which they find themselves.
The reality is that we cannot compete with imported goods unless the quality of our products is good enough to ensure both that we can export them to other countries which want them and that they can compete in design, quality, price and marketing with other countries' products. I challenge hon. Members to tell me that they have not bought a Seiko watch, a Japanese car or a Japanese television set. If they were honest about why they bought those goods, they would admit that it was because they believed that they were getting something worth having.

Mr. Barron: Does the hon. Gentleman agree that the Government should intervene in private industry, as the Japanese Goverment do, to ensure that products on the


bench and in scientists' minds are brought into production? Or does he agree with the Government that the Government should leave that to the free market?

Mr. Cash: In Washington the situation is different. I have sympathy with the car workers at Longbridge, but as individuals they now have to compete with fellow car workers in Washington. It is a question of the quality of production.
We must take on board this essential ingredient in our economic strategy. We have lived through a period when economic decline seemed to be with us. It was directly attributable to nationalisation and to the dead hand of bureaucracy which goes with it. That is now being substituted by the semantic alchemy of social ownership, which is utterly meaningless. It is nothing more than a change in emphasis. Many moderate Opposition Members know that it is just a con and a fraud on the British people.
When Opposition Members are joined by the expected flood of militants in the new Parliament, the word "nationalisation" will reappear. All the vague semantic differences between social ownership and nationalisation will be back with us again. That will he the means by which this country goes back to the dark ages of the economy if the British electorate vote for them in sufficient numbers, which I doubt will happen.

Dr. Jeremy Bray: I am sorry that the Chancellor of the Exchequer did not have the grace to give way when I sought to intervene this afternoon. I am glad that he is back in the Chamber, and I hope that I shall have the chance to allow him to intervene.
The point that I hope to make was made eloquently by my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon), the Chairman of the Public Accounts Committee, who quoted a document which is well known to the Chancellor because he was the author of it. He was not just the signatory, he was the author and inspirer—one of the three musketeers. They consisted of himself, Sam Brittan and Peter Jay. All three have flown from their loyalty to the document. One disciple is left — young Tim Condon, who was Peter Jay's deputy at The Times, and who is still weeping bitter tears at the Chancellor's desertion from his former policy.
I remind the House of that policy. In the Financial Statement and Budget Report 1980–81, which laid out the shape of the medium-term financial strategy, the Chancellor said:
Control of the money supply will over a period of years reduce the rate of inflation. The speed with which inflation falls will depend crucially on expectations both within the United Kingdom and overseas. It is to provide a firm basis for those expectations that the Government has announced its firm commitment to a progressive reduction in money supply growth … To maintain a progressive reduction in monetary growth in these circumstances it may be necessary to change policy in ways not reflected in the above projections. The Government would face a number of options for policy changes to achieve this aim, including changes in interest rates, taxes and public expenditure. But there would be no question of departing from the money supply policy, which is essential to the success of any anti-inflationary strategy.
The words "exchange rates" are not even mentioned in the text of the medium-term financial strategy. They began to creep in after two or three years and today the Chancellor explained that adjustments to the exchange rate due to the fall in the oil price have now taken place and it was now

at a level which should be sustained. The strategy has been completely abandoned. Some new hon. Members do not remember just what it was that tied the Government down.
Just the other day the Governor of the Bank of England said in his lecture at Loughborough:
Monetary targetry is only a means to an end. There may be circumstances in which the relationship between the intermediate target and the end objective changes unpredictably"—
that has happened in the relationship between money incomes and money supply—
as has indeed been our experience during the 1980s. In that case if the marksman does not have the wit to adjust his aim he may inflict severe injury on the economy.
That is precisely what happened. The severe loss of competitiveness in Britain because of the rise in exchange rates between 1980 and 1982 resulted in a swathe of destruction of manufacturing industry — more than Hitler managed to destroy in the war. It was destroyed by the pigheadedness of the Chancellor. Today the economy rests in the hands of this pigheaded man.
Where have we got in terms of the conduct of monetary policy to stabilise the exchange rate? The major change is the switch from a money supply target to an exchange rate target. That is what the Chancellor has done, although he will not admit it. While he was pursuing a money supply target, he neglected the behaviour of other economies. It was a marvellous idea. He could forget about international economic co-operation. It did not matteer what the other guys did. We could get automatic stabilisers working correctly in our own economy by stabilising the growth in the money supply.
However, it takes two to make an exchange rate. Exchange rates are vulnerable to the movement of United States interest rates and to the United States deficit, to whatever happens to the Bundesbank, to interest rate policy and to intervention policy.
We have heard references to international economic cooperation at various meetings. The Chancellor has complained about the misbehaviour of the American economy in particular. That economy is far more successful than ours, under a man who is every bit as Right wing, but he is less mistaken technically and less pigheaded than those who have shaped our Government's economic policy.
The management of the more complicated exercise of trying to stabilise exchange rates must have an eye on the prime objectives — of unemployment and inflation. It must also keep an eye on the intermediate target of the exchange rate. That can become complicated with movement of interest rates elsewhere. It is natural that the Treasury should have now adopted methods of analysis which come under the generic label of policy optimisation on which in 1975, by way of an amendment to the Industry Act, I required the the Government to issue forecasts.lt is as a result of the discharging of that statutory obligation that the Chancellor made his statement today.
Also in that amendment, for which the Chancellor voted, was a requirement on the Treasury to implement the methods of policy optimisation on the Treasury model. Under a Tory Government, that has been done, and the Chancellor has adopted the computer programmes of the research group that I established in 1971 at Imperial college. Those are a practical guide to the complex business of trying to stabilise the exchange rate where others are playing their own game in other countries. That now needs to be carried on to the international level.
I suggested to the Chief Secretary that the Treasury should help to introduce such work in the design of international economic co-operation into the OECD, because that is now technically a much more sophisticated animal than the International Monetary Fund. The IMF is talking about taking over the OECD analytical system. The Chief Secretary fluffed it. He inquired at the wrong level in the OECD, and the opportunity for the United Kingdom Treasury to exercise some seminal influence on the development of methods in the OECD seems to have slipped.
Let us move from the broad macro-strategy to the control of public expenditure. I thought that the Chief Secretary was a person of some integrity, and I was astonished that he should have lent himself to that fraudulent act of examining speeches made by Labour Members, taking every little phrase, misinterpreting it and taking it out of context, leading to the absurd estimates of what effect Labour proposals will have on public expenditure. The Chief Secretary has shown himself in that office simply as the pawn of some scruffy little researcher in Conservative Central Office. That list has all the evidence of a Central Office hack job that Ministers are normally sensible enough to ignore completely. The Chief Secretary lent the weight of his office to a so-called costing of these policies, of which the Treasury officials who lent their hand to it should be thoroughly ashamed.
Again, to help us in the serious analysis of public expenditure questions, I made a further suggestion to the Chief Secretary, that the annual public expenditure White Paper should be presented to the House in such a way that we could genuinely examine alternative policies, so that if we wanted to argue for a change in the pupil-teacher ratio, or greater expenditure on the youth training scheme so that it could be made effective, or whatever, the effects could be traced through in all the interactions and ramifications within the expenditure of the different Departments involved. Again, the Chief Secretary fluffed it, and has presented to the House simply that document, which I agree is an improvement over what it was, but is still a totally inadequate basis for the serious costing of alternative policies.
The Government are not concerned about informing the House or the national debate on effective alternative policies. They are simply exposing themselves to the same hack attitude that the Conservative Central Office, under the chairmanship of the Tory party leader, is showing to the BBC.
There is then the effect on the micro-structure of the economy. Up to a point, we had an honest speech from the hon. Member for Ellesmere Port and Neston (Mr. Woodcock), who represents various areas around Stanlow, the Shell oil refinery, outlining the factors that have caused the 7,000 redundancies in his constituency. It is important for the Government to be able to follow the implications of the changes that they are making on the fortunes of the major companies and on a representative sample of the smaller companies, so that they can see, for example, when corporation tax provisions are changed, whether companies have any taxes that they are liable to pay against which they can offset allowances.
The person who pioneered that work in the United Kingdom was Dr. John Kay, who has just moved from the Institute of Fiscal Studies to director of the centre for

business strategy at the London Business School. He led the way to the Treasury implementing a similar way of analysing the tax liabilities of companies. So anxious was the Chancellor for Dr. Kay's insights into the workings of the markets to play a part in the regulation of the stock exchange that he knocked Dr. Kay off the list of nominees of the Department of Trade and Industry to be on the Securities and Investments Board.
On the question of what should be done about companies, again the Treasury is moving. I have argued for years that our analysis of the economy is inadequate if we do not, and cannot, look at the position of individual factories, establishments and companies within our constituencies, where we know perfectly well what the real impact of Government policies will be, but which are a shut book to the Government, using simply aggregate statistics.
Again, we have an initiative, which I warmly welcome, financed by the Chancellor through the so-called consortium of the Treasury, the Bank of England and the Economic and Social Research Council to develop a micro-to-macro-economic model system. For example, a model might be constructed to take into account the behaviour of competing firms and the factors influencing individual management decisions on output, prices and factor demands.
I refer to the work done on the Swedish economy. Sweden has individually modelled enterprises, down to the production division level, of 80 per cent. of Swedish manufacturing industry. Therefore, it is able to trace what the effects of, say, the exchange rate shift would be on different firms. The Chancellor's PPS may smile. He comes from a city that has just been through an enormous big bang. The investment analysts are paying themselves fantastic sums of money. I am sure that he is not aware of the fact that the biggest market for company level analysis in responding to Government behaviour is the investment analysis market. That will be the market which the London Business School will supply under the consortium that I mentioned.
Arrayed on the Government Front and Back Benches is the old, incompetent guard of the pigheaded, highly privileged but incompetent tradition within business, banking and finance in the Tory party. While those are the intellectual influences that prevail, and while that is the level of complete incompetence of which the Chancellor is aware—nobody knows better his changes of position—there is no hope for the economy. The dishonesty, as well as the incompetence, of the Government, will see them out of office.

Mr. Martin M. Brandon-Bravo: Notwithstanding the tragic problem of unemployment in my home city of Nottingham, I am more than content to support the amendment in the name of the Government and to reject the Opposition motion. Many contributions have been in the customary macro-economics of debates of this kind. I join with the comments of one of my colleagues, my hon. Friend the Member for Ellesmere Port and Neston (Mr. Woodcock), who made an excellent speech. He related this debate to his constituency and outlined how events in his constituency had led him to support the Government's policy.
In Nottingham, 23,500 people are unemployed. That is a great personal tragedy to thousands of families. A


Labour party pamphlet that has been circulated in that city has the same disregard for the truth as most of the speeches that we have heard from the Labour Benches. For example, the pamphlet talks of seven disastrous years and says that our city has 14,000 more unemployed than it had in 1979. I cannot deny that. It is a fact. However, the pamphlet slips up because it points out that there have been 30,000 job losses in the city during the past seven years. Perhaps the Chancellor, with his great knowledge of mathematics, will confirm my calculation that that means that we have created 16,000 jobs in the same period.
I draw the House's attention to the reasons that the Labour party gives for unemployment and the companies that it lists that are shedding jobs. Two companies appear to account for half the number—TI Raleigh, which has shed just under 6,000 jobs in that seven-year period, and Players, which has shed just under 2,000. It is being suggested that that is the result of Government policy, and I accept that it is in one small respect. My right hon. Friend the Financial Secretary to the Treasury, who was a Minister in the Department of Trade and Industry, will be well aware that one of the results of regional grant aid was to shift quite a few hundred jobs from TI Raleigh in Nottingham to South Wales. I am delighted that we have reformed our regional policy since then. Far too much money was spent merely shifting jobs from one area of the country to another.
The real loss of jobs at Raleigh has nothing to do with Government policy. Nottingham is the proud home of a vast university as well as a vast technical college and polytechnic, which means that if it were in another country the city would be full of cyclists, yet we hardly ever see them. Our young people, unemployed or not, drive bangers or ride motor cycles. My son has a banger, and he will not thank me for calling it that because it is his pride and joy. There has been a massive decline in the home market of the cycle industry because many people no longer ride bicycles, and there is no point in blaming the Government for that. If there are no customers for cycles, cycles will not sell.
The other company that is referred to in the pamphlet is John Player. As I have said, the pamphlet is seeking to blame the Government for the loss of 2,000 jobs in the tobacco industry. There is great dishonesty on both sides of the House in the debate about smoking. Everyone complains about the habit, but when smoking declines it is the height of hypocrisy to publish a leaflet that claims that Government policy has destroyed 2,000 jobs in Nottingham.

Mr. Geoffrey Lofthouse: i shall try to bring the hon. Gentleman down to earth. What would he advise the 42 per cent. of all those under 24 years of age in my constituency to do? The males would have gone normally into the mining industry but that is no longer possible, and there are no other opportunities and no Government aid to assist employment in the area. They have no bangers or motor cycles.

Mr. Brandon-Bravo: I cannot speak for the hon. Gentleman's constituency. He represents a mining constituency, and I think that the entire House sympathises with the towns and cities throughout the length and breadth of the country that relied on one industry. When that industry has to die there is a social

problem, and nobody will argue on that ground. The single-industry town is our nation's tragedy and there are no quick fix-it answers to the problem.
Another company is referred to in the pamphlet and the job losses in it are not, as claimed, the result of Government policy. The company is in the textile sector, and as I spent about 30 years in that industry, courtesy requires me not to name it. I do not wish to intrude on private grief. It is sufficient to say that the group in which I was engaged—I was proud to be one of its chief executives — employs more people now than in 1979, even if the group that is named in the pamphlet has shed 3,000 employees.
No one denies that there has been a decline in the textile industry, but I take this opportunity to thank my right hon. and hon. Friends on the Treasury Bench for the work that they have done. They listened honestly to representations by hon. Members on both sides of the House on the multi-fibre arrangement. The author of the pamphlet is supposed to be on our side in fighting for a good multi-fibre arrangement, but when the county council in the area which I represent, which is Labour-controlled, organised a local conference to enable us to put our case together prior to putting it before Ministers, he began to criticise the British retail trade. In particular, because he happens to he one of the far-Left politicians, the author chose to criticise one of our most successful high street chains, Marks and Spencer plc. Somebody should have told that prospective Labour party candidate that, but for companies such as Marks and Spencer, there would not be a textile trade in this country. Job losses would have been 10 times worse. [Interruption.] Labour Members can rattle on, I do not mind.
The pamphlet went on to state, in the same dishonest vein as members of the Opposition Front Bench adopt, that, somehow or other, unemployment can be cured in the lifetime of a Parliament. The leaflet sets out a scheme to create 5,000 jobs in each of the five years' duration of a Labour government. Lo and behold, there will be nil unemployment in the city of Nottingham. It is utterly dishonest. Fortunately, the author of the pamphlet knows as much about the city of Nottingham as Arthur Scargill did. The people of Nottinghamshire told Arthur Scargill where to go when he tried that stupid business two years ago. I thank my right hon. Friends on the Government Front Bench. I would thank them much longer, but I have only a couple of minutes in which to conclude my remarks.
Hon. Members on the Government Front Bench have targeted real help to cities such as Nottingham. One of the Government's great unsung successes has been urban development grants. This week, I was grateful for yet another grant to our city. In the past three or four years, about £4·5 million of public money has produced investment of some £25·5 million in Nottingham. That policy is one of the great successes. Nationally, though it is decried by Labour Members, £100 million of public money has produced well over £400 million of private investment.

Mr. Cash: Does my hon. Friend acknowledge that, at the end of this debate, when the Opposition have apparently attempted to censure the Government on their economic strategy, the Chamber is almost devoid of Opposition Members, including the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley), who led the debate for the Opposition. Does my hon. Friend also


acknowledge that this has been one of the most tawdry exhibitions by the Opposition that we have witnessed in this Parliament?

Mr. Brandon-Bravo: That is a fair point. [Interruption.] May I conclude? That is the arrangement that was made, if that is what the Opposition Front Bench is getting so uptight about. I ask the Government Front Bench to hang on tightly to the basic policy of restraining inflation. Nothing destroys confidence, savings and jobs more than runaway inflation. My great worry is that, in a city such as Nottingham, there are thousands of young people who have no real memory of the monster of runaway inflation that so characterised the Labour Government's term of office. Heaven help us if Labour Members have a chance to do that again.

Mr. John Prescott: At the outset, I wish to direct a very serious matter to the Chancellor of the Exchequer. During his introduction of the autumn statement, he informed the House that the information about it would not be available to hon. Members or, presumably, to anyone else until he sat down. He sat down at approximately 10 minutes to four. At about five o'clock we discovered a Conservative research department brief, marked "confidential" in a telephone booth in the House. That document contained all the details of the statement, but came from the Conservative party office. Clearly, that is a serious matter. Obviously, the Chancellor would wish to address his mind to it, particularly as the Chancellor of the Duchy of Lancaster is also the chairman of the parliamentary party and sits in the Cabinet. Will the Chancellor of the Exchequer assure us that this information was not available confidentially to the Tory party central office so that it could make notes on the statement? I am quite prepared to give way to the Chancellor.

Mr. Lawson: I can give that assurance.

Mr. Prescott: Do I understand the Chancellor to say that he gives the assurance that it was not given to the central office before 10 minutes to 4 o'clock? If that is the case, I must say to him that the detail of the six or seven pages of his statement would have had to be printed, produced and brought to the House, all within one hour.

Mr. Lawson: I will happily double check. I shall explain the procedure that we use. That document was produced by my special advisers in the Treasury. [HON. MEMBERS: "Oh."] The top page was stapled on later. It was not done by Conservative Central Office.

Mr. Prescott: I do not find the Chancellor's answer satisfactory. I now give him notice that I should like him to reflect on the answer he has given to the House. At the end of the debate and after the House has met, we could consider through the normal channels whether the right hon. Gentleman wants to think further and give the House a more informed reply.
Undoubtedly, the debate has shown us that the exchange between the two sides of the House and the nature of the autumn statement have dominated the Opposition's motion on the economy and employment. Perhaps that was inevitable, but it has been clear that, apart from the Government Front Bench and one or two

other Conservative Members, most hon. Members have been highly critical of the performance of the economy after seven years of this Government. Having listened to the speeches, one would have thought that Labour went out of office 12 months ago and we were still being blamed for all the problems in the economy, or that it was the Labour party that paid for the advertisement that said that Labour was not working, when unemployment was just over 1 million.
The debate has flowed between both sides of the Chamber. It has shown that the level of investment, particularly in manufacturing, is still below the 1979 level. There is a crisis in the balance of payments and a trade deficit in manufacturing. Exports may be increasing, but imports are increasing much faster. Even much of the evidence on interest rates—we already know that we have record interest rates compared with other economies — and the Chancellor's facts on inflation had been somewhat tampered with, inflation being taken as an average for the rest of Europe and the averages during the terms of the Labour Government and the Tory Government being compared.
We have seen a great deal of manipulation of statistics and even a picking of years. Unusually, the Chancellor chose 1973 as the base year. Most of the evidence given for the revival in the British economy, according to the Chancellor, is taken from before 1981 or 1982, as though the Conservative party did not come to power until then.
One particular aspect missing from the autumn statement was a projection of what would happen with employment. There is a debate about unemployment. Few Conservative Members, with honourable exceptions, mentioned the problem of unemployment. A great deal of play was made of inflation, but the consequences of the mass unemployment which we have seen develop after seven years of Tory Government rule are clear for everyone to see, no matter how the figures are dressed up.
The Opposition are grateful for one factor in the speech the Government claim that the levels of public expenditure now are higher than they were under the Labour Government. The intention is to raise the contingency reserves, to use other resources, such as those obtained from privatisation, to increase the levels of public expenditure. Those wasteful bodies, as the Chancellor and other Ministers regard them—the local authorities—will be used to spend the money. Those are precisely the sort of methods that the Labour party has argued should be used to get our people back to work. This very much reflects the evidence—it had to be dragged out by way of a leaked document—given by the Government to the European Commission when they were pleading for more money to deal with the collapse of aspects of the infrastructure—the decline in our inner cities and the stagnation of our housing programmes. All those items are spelt out in the documents given to the Commission because the Government were seeking money. They are precisely the type of public investment projects that the Labour party believes can be used to get people back to work.
I was somewhat surprised to hear almost cheers from the Conservative side when the Chancellor claimed how good the Government were at using public expenditure. Although we may argue that the expenditure is not large enough—there will be differences between us—we would


be churlish not to welcome the fact that public expenditure, in certain areas, will he used to considerable effect in providing real jobs.
When the Chancellor was pressed for his predictions on unemployment he could not answer. He discussed whether unemployment might reach 3·2 million. The document that was given to the Commission suggested that by 1990 it would still be about 3·2 million. That is before the Government get to work on a further fiddle—the 18th—of the unemployment figures. The Chancellor of the Duchy of Lancaster may well regret his statement that the Tory party should not be re-elected if unemployment is not below 3 million. I suspect that more and more pressure is being applied for an increase in public expenditure, to chase more and more people from the employment exchanges, to create more and more low-pay schemes and more part-time and self-employed jobs in order to doctor the figures in an attempt to massage them down below 3 million.
We heard the arguments about the real levels of unemployment and of employment. The Government said that they have created a million jobs‖indeed, that figure is in the amendment to our motion. The Chancellor is well aware that that I million is made up of over 823,000 self-employed. The level of self employment has increased by 823,000 during the Conservatives' term of office. That increase is largely due to a statistical exercise. The Chancellor is aware that the figures were based on a 5 per cent. survey and they have been constantly rejigged. That has caused concern among statisticians as to whether one can prove the claimed increase in new jobs. That is the least of the Government's statistical offences.
It is true that more part-time work has been created, and, indeed, it is the Government's policy to encourage that. If one wanted a fair measure of an increase in employment one must consider the 142,000 extra people in work when Labour left office compared to when it took office, and the fact that almost 1·5 million more people are unemployed now compared to 1979. I do not deny that there will be more and more part-time and flexible working within the economy, but one must judge that in terms of full-time equivalents. It is a crude measure, but it has been used by the Bank of England. I asked the Library to compare the period when Labour was in power-1974 to 1979 — with the period of this Administration. Between 1974 and 1979 the increase in full-time equivalents was 93,000. My hon. Friend the Member for Rother Valley (Mr. Barron) suggested that, under this Government, 1 million full-time equivalent jobs had been lost to the employment market. The Library's calculations show that that loss is 1,936,000.
That is the scale of the decline in employment prospects since 1979. However it is measured, it is a catastrophic decline. When Britain's unemployment is compared with that of any of our competitors, using the OECD average, the EEC average or the figures I have here from a very authentic source, we find the same story. The British average is 13·3 per cent.; the EEC average is approaching 10·8 per cent.; and the OECD average is 8·1 per cent.

The Chief Secretary to the Treasury (Mr. John MacGregor): What is the source?

Mr. Prescott: My source is the private and confidential document given to Lord Young to brief him on the unemployment figures. We presume that that document is acceptable.
In reality, whether in percentage or absolute terms, the Government's policies have had a catastrophic effect on employment, and are a direct cause of the high level of unemployment. Perhaps, as suggested in the debate, the Government will switch from a monetarist policy. I believe that they will.
It is important to compare what has happened to Britain's patterns of public expenditure with those of our main competitors in Europe. They increased their public expenditure, as did Britain, but they put less into defence and more into housing and infrastructure — the very things that the Chancellor complained about in his evidence to the Commission when he was asking for money. One of the essential differences between us and our European competitors is when it comes to managing the economy. It concerns the quality and the type of public expenditure.
It is a bit much for the Chancellor to suggest that the Opposition exploit the unemployed when his party gave us "Labour isn't working." More important than that, the Government have conducted 17 fiddles of the unemployment figures. Their latest pernicious activity is the suggestion that the unemployed should be subjected to an interrogation about whether they are working.
The Government are suggesting that those who suspend people's unemployment benefit if they fail a questionnaire should become bounty hunters and be paid according to how many people they suspend from the employment benefit. That is shown by another Government document. The evidence has been debated in the House. That demonstrates the Government's pernicious approach to the unemployed.
The Government's policy is to drive people off the employment exchange and not to provide them with work. When the Government say that the Opposition exploit the unemployed, I must remind them of a notice that we received in our post this morning. The Government create part-time employment and talk of successful business and of removing the barriers to business. The right hon. Member for Taunton (Sir E. du Cann) said that the burden of costs on business should be relieved. He mentioned electricity costs, but the Government talk about reducing health and safety protection and removing employment protection rights.
The Equal Opportunities Commission told us today that anybody who appeals against unfair dismissal will now have to pay a £25 tribunal fee to have a complaint heard. That £25 fee will presumably be taken from a single householder who gets £30 a week benefit, supposing that it has not been suspended. That is the kind of priority that the Government give to the unemployed and people in part-time and other forms of employment about which we have heard today.
Hearing the right hon. Member for Taunton speak of reducing costs reminded me of the Chancellor saying that the Government had managed to secure increased revenue from corporation tax. The reason is, presumably, that corporation tax has increased by about 25 per cent. since the Government came to power. It involves many thousands of millions of pounds made by companies.
The prevailing wisdom is that companies will invest. We know that they have often not invested in machinery but, more to the point, they have not put their money into training either. We have the worst trained labour force of any developed country, yet companies put only one fifteenth of 1 per cent. of turnover into training. According


to the Manpower Services Commission, most of our competitors put between 2 and 3 per cent. of turnover into training.

Mr. Lawson: I have said that.

Mr. Prescott: The Chancellor should remember that he has relieved companies of the training levy, dismantled several of the industrial training boards and witnessed a collapse in the number of apprenticeships. If British companies invested only 1 per cent. of turnover on training, that would raise between £6 billion and £8 billion. The taxpayer would then not have to find the £2 billion now needed for the skivvy youth training and community programme schemes.
The Chancellor asked me how much Labour's programme would cost. The Chief Secretary to the Treasury has made some scandalous charges. He should be thrown out of accountancy in view of what he said about the costing of Labour's programme. The Chief Secretary has trawled through various speeches and documents, some of them quite wrong, and discovered, apparently, that our training programme would cost £900 million. Let me tell him, the analysis was incorrect. More importantly, why should we not impose a levy on industry to pay for training? Previous Tory Governments used to believe in levies because industry would not invest in training. Do not be surprised, industry will pay for training as our competitors and many industries abroad already do. We are short of every kind of skill in this country and we have to make a rapid and radical change in our training programme. There is no doubt about that. We know that it costs money. Industry is not paying anywhere near its fair share, even on the Chancellor's own evidence.
Many of the 26 proposals mentioned in the document are wrong. The Chief Secretary has already admitted that perhaps on education he was wrong. He quotes speeches and documents. The Labour party will put through its commitments in the manifesto when we decide them in the normal way. I shall give the House some examples. The Chief Secretary said that there is a commitment to a 35-hour week. That is not a commitment anywhere in our document, although we might like to move towards it. The Chief Secretary gives us a bill of £3,000 million for that. He also mentions early retirement at 60. That is something that the Government have regrettably changed. He gives us a bill of £2,600 million, but that is not a commitment. We also have no commitment as to precisely what the minimum wage would be. There is a commitment to a minimum wage but one cannot possibly estimate the cost without knowing what that wage will be. Yet the Chief Secretary tells us that it will cost £1,000 million. Therefore, there is a total bill of £6,600 million and no commitments. It is a charade. The Chief Secretary should answer those questions.
If the Chief Secretary looks at our document he will also see that money should be made available for housing. We are witnessing the building of 2,000 houses fewer per week than we did under a Labour Government. That is one indictment of the Government. The local authorities have the money — £6 billion in capital receipts — and there are 500,000 building workers unemployed. My constituency has worked out a programme for 1,000 houses at a cost of £66 million a year. That would provide

4,000 jobs and good training. I can give the House many public expenditure examples where the Chief Secretary calls for the money from the EEC.
We are working extremely hard to see where the extra jobs will come from, whether in nationalised industries, local authorities or the private or public sectors. Yes, they can do much more to provide jobs and they will, make no mistake about it.
There is one carefully costed document that I would like to give the Chief Secretary. It has been worked out in detail with the financial people and spells out precisely what the jobs are and where they will come from. It is an inner-city authority with a massive housing problem and is in massive decline, which is recognised by the Government in their inner-city partnership schemes. That authority is Southwark. It has produced a plan which shows precisely where the jobs will come from. There will be 5,800 jobs, 25 per cent. of them in housing and about 20 per cent. in social services. I notice that many of the jobs provided in social services are to deal with the problem created by the Government when they kicked people from mental hospitals in the name of community care and dumped them on local authorities without providing the resources for the authorities to deal with that.
I hear the Government talking about £4·5 billion they are giving local authorities to assist them in their expansion programmes. Local authorities have lost over £20 billion in the reduction in the rate support grant. That is why we have seen a reduction in jobs and services. We must be prepared to look at the needs of our inner cities, the needs of our services, the need to build houses and the need to train. Many of our local authorities, which have been doing a valiant task trying to create jobs and improve services, could provide a considerable amount of the jobs we are talking about.
I shall let the Chancellor into a secret. A proportion of the 1 million job target that we have set to achieve over the two-year period will almost certainly come from local authorities. I have three projects before me now Lancashire enterprise body, Southwark and the Hull corporation. We could certainly put together 10,000 jobs there if he is prepared to take those targets now. We can do that if the resources are available. Local authorities are engines of growth. They are important in the development of our economy.
It is all very well for the Chancellor to smile but his proposals today hope to use the local authorities in the spirit of election because they learned a lesson. In 1983, the only time when the figures showed a flip upwards in reducing unemployment, the Chancellor told local authorities to spend, spend, spend public money because he wanted to reduce unemployment before the general election. The Chancellor has done the same today. No doubt the Budget statement in March will add to the tax cuts in today's proposals.
The Opposition believe that local authorities and nationalised industries can play a role in keeping real jobs, with real money, meeting real need. We shall provide the alternative to the skivvy community programme and YTS schemes which the Government have used to reduce the figures. We shall provide real jobs and real money to meet real need.

The Chief Secretary to the Treasury (Mr. John MacGregor): One of the penalties of trying to allow


everyone to speak in the debate and therefore having only short wind-ups is that I cannot, alas, refer to as many contributions as I would have liked.
All of us recognise—and no one would claim to the contrary — that, despite the improvement in the economy, there are still, and always will he, enormous challenges even to sustain our present standards of living, given the highly competitive world in which we live, and to keep our industries constantly competitive, changing and flexible. There are also enormous challenges to deal with unemployment.
The contributions from Opposition Members showed that they were living in the past. They fail to recognise the highly competitive world in which we live. They fail to recognise how things change. They seem to believe that past habits, structures and types of industry can go on for ever. They would do well to heed the contributions of my right hon. Friend the Member for Guildford (Mr. Howell), for Ellesmere Port and Neston (Mr. Woodcock) and for Darlington (Mr. Fallon) who made pertinent comments on that point. Opposition Members also fail to recognise the considerable progress of the past five or six years, which must be the background to this year's spending plans.

Mr. Max Madden: On a point of order, Mr. Speaker. I think you will have been told that there is considerable concern on the Opposition Benches about a document which has been produced by Conservative and Unionist central office, which contains considerable details about the public expenditure statement.

Mr. Speaker: I understand that this matter has already been raised and that it may be raised again later.

Mr. Madden: Further to that point of order, Mr. Speaker. Surely the Leader of the House should make a statement about who produced the document, when it was circulated, and to whom. Will we receive some information about this, as clearly the Chief Secretary to the Treasury is very reluctant to reveal details of the party political activities of senior Treasury officials?

Mr. Speaker: I must tell the hon. Gentleman that the Chief Secretary to the Treasury has been on his feet for only two minutes. I have had an intimation that this matter may be raised as a point of order later. I think that we should leave it at that.

Mr. MacGregor: That intervention has taken two minutes of my time. For the hon. Gentleman to raise that point in a debate about employment, jobs, and the Government's programme shows how serious he is about these matters. If that is all that the hon. Gentleman can do [Interruption.]

Mr. Speaker: Order. The debate has proceeded in good order until now. I ask the House to give a fair hearing to the Chief Secretary to the Treasury.

Mr. MacGregor: I am grateful to you, Mr. Speaker, as I should like to deal with the debate and the Government's expenditure programmes, which are extremely important.
The background is that we are now into our sixth successive year of economic growth at an average so far of nearly 3 per cent. per annum. That is the longest period of uninterrupted growth since 1973. The volume of total fixed investments, to which many hon. Members have referred, is at an all-time high and manufacturing

investment—and we heard so much about manufacturing investment from the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley)—is up 31 per cent. since the last election. Company profitability is the highest for more than 20 years—almost three times the 1975 level.

Mr. Hattersley: rose—

Mr. MacGregor: This is the last time that I shall give way.

Mr. Hattersley: I am concerned about the right hon. Gentleman's selective use of figures. He said that manufacturing investment had risen since the election. Will he tell us its relationship with the election when his party became the Government in 1979?

Mr. MacGregor: The right hon. Gentleman knows perfectly well that there was a deep worldwide recession after 1979, but what actually matters is the progress since then. I should have thought that the right hon. Gentleman would welcome the fact that manufacturing investment is up by 31 per cent. Export volumes—non-oil—rose by 2·5 per cent. in the third quarter of 1986 to an all-time high. It is worth pointing out that there has been no previous five-year period in recent history over which manufacturing has so successfully held its world market share.
Recently, inflation has been at the lowest level for almost 20 years. The lowest on-year inflation rate recorded by the previous Labour Government was higher than any inflation rate since the election. The right hon. Member for Sparkbrook suggested that inflation was the only successful indicator of the Government. As I have demonstrated, it is not. But how wrong he would be to downgrade the importance of inflation, as his Government did. It is on the way to a level that is well below any level that the previous Labour Government ever achieved in one year. I tell the right hon. Gentleman that the battle could so easily be lost again, at such damage to our economy and international competitiveness, as it would be under Labour policies.
That is why today the Chancellor put such emphasis on the fact that there would be no relaxation of our fiscal stance in the medium-term financial strategy published at the time of the Budget. It is vital, underpinning all that we set out in our programmes today. As my right hon. Friend said, there can be no question of allowing the projected increases in public expenditure over the next two years to undermine the prudence of the Government's overall fiscal stance.
Equally vital is the continuation of our objective to reduce public expenditure as a proportion of gross national product, which we have succeeded in doing over past years and in the programmes now before the House. The success of the economic strategy, reflected in inflation at levels not seen for almost two decades, and economic growth averaging nearly 3 per cent. for six successive years—that prudent management of the economy—enables us to make further increases in priority services. [Interruption] I want to say a word about them. This debate is about our public expenditure programmes as well. The first point that I should like to make is this. Over the past few years, when we have been succeeding in getting public expenditure down as a proportion of CiDP—[Interruption.]—we have also succeeded—

Mr. Robert Key: On a point of order, Mr. Speaker. It is impossible for us to hear the debate. Only 30 members of the Labour party are present for this important debate, and they are shouting and buffooning —[Interruption.]

Mr. Speaker: Order. I ask the House to hear what the Chief Secretary has to say.

Mr. MacGregor: I am grateful to you, Mr. Speaker.

Dr. Bray: Will the right hon. Gentleman give way?

Mr. MacGregor: I shall not give way now. I have only a short time left.
As I was saying, over the entire period we have been increasing public expenditure in key priority areas. I now want to say a word about how we are doing it in the plans announced today. We have made a major increase in the current three-year plans in provision for education, for both schools and higher education. The universities are being offered substantial increases in funding in return for their agreement to an approach that embraces a greater emphasis on quality in teaching standards, improved financial management, greater selectivity and some rationalisation. We are providing more for local authorities' capital and current spending on schools.
Funds have also been made available for the city technology college initiam c announced recently by my right hon. Friend the Secretary of State for Education and Science. We have made provision to cover the full costs of the offer on teachers' pay that he announced to the House last week. As he made clear, that offer is tied to terms and conditions of service for the teaching profession which mean that teachers would have enforceable contracts of employment which would specify their professional duties. We believe that that is a fair, reasonable and generous deal for the taxpayer and the ratepayer who will have to find the money and for the teachers.
In the three-year plans, education features most prominently, which demonstrates the Government's commitment to give the education service the resources that it needs. That is what we have been doing throughout, because the amount of education spending per pupil has increased considerably in real terms over recent years.
Let me deal with the next priority area. Our plans provide for a 2·2 per cent. real increase in expenditure on the hospital service next year. That will enable the Health Service to respond to growing needs and an increasing number of patients, with improving services. In addition, the hospital service will retain the full benefit of increasing resources being released through the cost improvement programme.
I have often noticed how little attention the Opposition give to value for money in terms of the use of the taxpayers' pounds. That programme has already achieved £390 million of cumulative savings since 1981–82, plus other improvements in efficiency. In the current year we expect a further £150 million in savings and we expect those savings to continue to accumulate throughout the survey period.
The result is that there are now 75,000 more front-line staff in the Health Service—17 per cent. more than in 1978. As a result of the survey decisions, my right hon. Friend the Secretary of State has also been able to announce further major initiatives in the Health Service. Capital expenditure on the hospital building programme

by the NHS rose by 31 per cent. in real terms between 1978–79 and 1985–86. No wonder the hon. Member for Thurrock (Dr. McDonald) does not want to know. That is in contrast to the 31 per cent. reduction under the Labour Government.
As my right hon. Friend has announced, over the next three years more than 100 Health Service building schemes, with an estimated value of nearly £700 million, are due to be completed. The total capital programme for the hospital and community health service will increase from about £1 billion this year to £1·2 billion by 1989–90. Health authorities will also retain in full receipts from sales of surplus land and buildings. What a contrast that hospital building programme is with the previous Labour Government's programme.
The same applies to the road programme, which has increased substantially in real terms, and to which we are giving further additional resources this year. Under the previous Labour Government the road programme was slashed in real terms.
We are also planning increased capital investment in housing. We have increased the provision in 1987–88 to honour the commitment given by my right hon. Friend the Member for Wanstead and Woodford (Mr. Jenkin) in 1984 to local authorities that we would guarantee them 80 per cent. of the 1985–86 allocations. In addition, substantially higher capital receipts from the highly successful programme of the sale of council houses are now forecast throughout the survey period, which will enable greater investment in housing and will allow carefully targeted increases to be made in gross spending on some vital programmes at relatively low cost to the Exchequer. We are targeting additional provision for the renovation of the housing stock through the urban housing renewal unit and are providing for the Housing Corporation to start on private finance schemes to provide additional low-cost housing.
We are also maintaining the priority that we have given throughout our years—an increase of 39 per cent. in real terms—to all issues dealing with law and order; to the police, the prison building programme and in many other ways; for example, in tackling the drugs issue.
Those are particular priorities on top of the priorities which were given to the employment programmes in the Chancellor's Budget, which increased our employment measures by £300 million next year and the year after. I was extremely distressed to hear the hon. Member for Kingston upon Hull, East (Mr. Prescott) describe them as "skivvy schemes". The youth training scheme, the community programme and many others are doing beneficial work throughout the community. We are spending about £3,000 million this year on such employment and training measures. It is typical of the hon. Gentleman to say that we are not spending money on employment and then to describe those massive sums as "skivvy schemes".
I wanted to cover many issues where we have achieved much greater value for money for the taxpayer through many measures that we have taken in efficiency scrutinies, competitive tendering, purchasing initiatives and in many other ways. All I can say is that I know that those are always criticised by the Opposition. They do not understand the concept of value for money. They do not understand why we are getting much more in output from our public expenditure programmes than has been achieved before.
Equally, I dismiss the idea that we have been neglecting capital investment. Infrastructure spending is likely to be up by about £1 billion next year on the previous figure of £20 billion. As a result, there are many examples all over the country of very significant capital expenditure programmes. Tonight, alas, I do not have time to deal with them, but I shall do so on another occasion.
The hon. Member for Kingston upon Hull, East referred to some of the Opposition's employment measures. It was interesting that the right hon. Member for Sparkbrook stressed that in all future debates he would concentrate on the Government's policies. As my hon. Friend the Member for Wycombe (Mr. Whitney) pointed out, that is no surprise. The right hon. Gentleman wants to avoid people focusing on his policies. It is no wonder that he got such a cheer from behind him. The probing of Labour's policies causes them as much embarrassment as it causes him, but he will not get away with it. It is right that the country should know, just as the national and international business and financial community already knows, just what disarray his policies are in, and what damage they would do to all the things that he spoke about today.
The hon. Member for Kingston upon Hull, East gave us some idea of which programmes would be dropped from those which I costed in that £28 billion.

Mr. Prescott: We have not decided.

Mr. MacGregor: The hon. Gentleman said that he was committed to a minimum wage. Does he still stick to the policies outlined at a recent Labour party conference, which involved the minimum being two thirds of average wages? We would all like to know the answer. Will the hon. Gentleman say which pledges he intends to drop?
Opposition Members have argued that their so-called poverty programme of £3·6 billion will be covered by taxing the very rich, or top 5 per cent., but that would do considerable damage to many people who will be most surprised to discover that they fall into the category of the very rich. It will also do considerable damage to the economy as a whole and to the wealth creators.
In addition, the hon. Member for Kingston upon Hull, East claims that a Labour Government would borrow an additional £6 billion on top of what we are doing in terms of job creation programmes. I have looked at the Southwark programme mentioned by the hon. Member for Kingston upon Hull, East. He said, interestingly enough, that it would form the sort of basis for the local authority programmes that he hopes to encourage —[Interruption.] The hon. Gentleman is certainly moving away from what he said in The Guardian. I have read about the Southwark blueprint, but such a programme would mean that the Labour party was claiming to achieve an additional 1 million jobs in two years.

Mr. Prescott: I did not say that. Just in case the Chief Secretary starts on another false trail, I should point out that I said that jobs would come from local authorities, nationalised industries and other industries. We have already begun discussing with local authorities the sorts of plans that we have in mind. That was one discussion yesterday. This is what I said and meant.

Mr. MacGregor: The hon. Gentleman will know that to achieve 1 million jobs over two years—[Interruption.] The hon. Gentleman does not want to hear, but achieving

that over two years would cost another £20 billion. Moreover, it would lead to higher rates for existing businesses, which would destroy jobs. During the next year or so we shall probe just to discover what is the basis of that programme.
We have produced public expenditure plans based on prudent management of the economy which enable us to increase resources in key priority areas. The Labour party's programmes would do enormous damage to jobs, investment and inflation, and that is why we reject the motion.

Question put, That the original words stand part of the Question:—

The House divided: Ayes 145, Noes 309.

Division No. 310]
[10.00 pm


AYES


Abse, Leo
Hardy, Peter


Archer, Rt Hon Peter
Harrison, Rt Hon Walter


Ashley, Rt Hon Jack
Hart, Rt Hon Dame Judith


Ashton, Joe
Hattersley, Rt Hon Roy


Atkinson, N. (Tottenham)
Heffer, Eric S.


Banks, Tony (Newham NW)
Hogg, N. (C'nauld &amp; Kilsyth)


Barnett, Guy
Holland, Stuart (Vauxhall)


Barron, Kevin
Home Robertson, John


Bermingham, Gerald
Howell, Rt Hon D. (S'heath)


Bidwell, Sydney
Hoyle, Douglas


Blair, Anthony
Hughes, Dr Mark (Durham)


Boothroyd, Miss Betty
Hughes, Roy (Newport East)


Bray, Dr Jeremy
Hughes, Simon (Southwark)


Brown, Gordon (D'f'mline E)
Hume, John


Brown, N. (N'c'tle-u-Tyne E)
Jenkins, Rt Hon Roy (Hillh'd)


Brown, R. (N'c'tle-u-Tyne N)
Kaufman, Rt Hon Gerald


Brown, Ron (E'burgh, Leith)
Kennedy, Charles


Buchan, Norman
Kirkwood, Archy


Callaghan, Rt Hon J.
Lambie, David


Campbell, Ian
Lamond, James


Campbell-Savours, Dale
Leadbitter, Ted


Canavan, Dennis
Leighton, Ronald


Cartwright, John
Lewis, Ron (Carlisle)


Clarke, Thomas
Litherland, Robert


Clay, Robert
Livsey, Richard


Clelland, David Gordon
Lofthouse, Geoffrey


Cohen, Harry
Loyden, Edward


Cook, Frank (Stockton North)
McCartney, Hugh


Cook, Robin F. (Livingston)
McDonald, Dr Oonagh


Corbett, Robin
MacKenzie, Rt Hon Gregor


Corbyn, Jeremy
Maclennan, Robert


Cox, Thomas (Tooting)
McTaggart, Robert


Craigen, J. M.
McWilliam, John


Crowther, Stan
Madden, Max


Cunningham, Dr John
Mallon, Seamus


Dalyell, Tam
Marek, Dr John


Davis, Terry (B'ham, H'ge H'l)
Marshall, David (Shettleston)


Deakins, Eric
Martin, Michael


Dewar, Donald
Maxton, John


Dormand, Jack
Meacher, Michael


Douglas, Dick
Michie, William


Dubs, Alfred
Mikardo, Ian


Duffy, A. E. P.
Millan, Rt Hon Bruce


Dunwoody, Hon Mrs G.
Morris, Rt Hon A. (W'shawe)


Ellis, Raymond
Morris, Rt Hon J. (Aberavon)


Field, Frank (Birkenhead)
Nellist, David


Fields, T. (L'pool Broad Gn)
Oakes, Rt Hon Gordon


Fisher, Mark
O'Brien, William


Foot, Rt Hon Michael
Patchett, Terry


Forrester, John
Pavitt, Laurie


Foster, Derek
Powell, Raymond (Ogmore)


Foulkes, George
Prescott, John


Freeson, Rt Hon Reginald
Randall, Stuart


George, Bruce
Raynsford, Nick


Gilbert, Rt Hon Dr John
Redmond, Martin


Godman, Dr Norman
Richardson, Ms Jo


Golding, Mrs Llin
Roberts, Allan (Bootle)


Gould, Bryan
Roberts, Ernest (Hackney N)


Hamilton, W. W. (Fife Central)
Rooker, J. W.


Hancock, Michael
Ross, Ernest (Dundee W)






Rowlands, Ted
Wardell, Gareth (Gower)


Ryman, John
Wareing, Robert


Sedgemore, Brian
Welsh, Michael


Sheldon, Rt Hon R.
White, James


Shore, Rt Hon Peter
Wigley, Dafydd


Silkin, Rt Hon J.
Williams, Rt Hon A.


Skinner, Dennis
Wilson, Gordon


Smith, C.(Isl'ton S &amp; F'bury)
Winnick, David


Snape, Peter
Woodall, Alec


Soley, Clive
Wrigglesworth, Ian


Spearing, Nigel



Steel, Rt Hon David
Tellers for the Ayes:


Stewart, Rt Hon D. (W Isles)
Mr. James Hamilton and


Thompson, J. (Wansbeck)
Mr. Don Dixon


Torney, Tom



NOES


Adley, Robert
Dicks, Terry


Aitken, Jonathan
Dorrell, Stephen


Alexander, Richard
Douglas-Hamilton, Lord J.


Alison, Rt Hon Michael
Dover, Den


Amery, Rt Hon Julian
du Cann, Rt Hon Sir Edward


Amess, David
Dunn, Robert


Ancram, Michael
Durant, Tony


Ashby, David
Dykes, Hugh


Atkins, Rt Hon Sir H.
Eggar, Tim


Atkinson, David (B'm'th E)
Emery, Sir Peter


Baker, Rt Hon K. (Mole Vall'y)
Evennett, David


Baker, Nicholas (Dorset N)
Eyre, Sir Reginald


Baldry, Tony
Fallon, Michael


Batiste, Spencer
Farr, Sir John


Bellingham, Henry
Fenner, Mrs Peggy


Bendall, Vivian
Finsberg, Sir Geoffrey


Benyon, William
Fletcher, Alexander


Best, Keith
Fookes, Miss Janet


Bevan, David Gilroy
Forman, Nigel


Biffen, Rt Hon John
Forsyth, Michael (Stirling)


Biggs-Davison, Sir John
Forth, Eric


Blackburn, John
Fowler, Rt Hon Norman


Body, Sir Richard
Franks, Cecil


Bonsor, Sir Nicholas
Fraser, Peter (Angus East)


Bottomley, Peter
Freeman, Roger


Bowden, Gerald (Dulwich)
Fry, Peter


Boyson, Dr Rhodes
Gale, Roger


Braine, Rt Hon Sir Bernard
Galley, Roy


Brandon-Bravo, Martin
Gardiner, George (Reigate)


Bright, Graham
Gardner, Sir Edward (Fylde)


Brinton, Tim
Gilmour, Rt Hon Sir Ian


Brooke, Hon Peter
Glyn, Dr Alan


Brown, M. (Brigg &amp; Cl'thpes)
Goodhart, Sir Philip


Browne, John
Gorst, John


Bruinvels, Peter
Gow, Ian


Bryan, Sir Paul
Gower, Sir Raymond


Buchanan-Smith, Rt Hon A.
Greenway, Harry


Budgen, Nick
Gregory, Conal


Butler, Rt Hon Sir Adam
Griffiths, Peter (Portsm'th N)


Carlisle, John (Luton N)
Grist, Ian


Carlisle, Kenneth (Lincoln)
Ground, Patrick


Carttiss, Michael
Grylls, Michael


Cash, William
Gummer, Rt Hon John S


Chalker, Mrs Lynda
Hamilton, Hon A. (Epsom)


Channon, Rt Hon Paul
Hamilton, Neil (Tatton)


Chapman, Sydney
Hampson, Dr Keith


Chope, Christopher
Hanley, Jeremy


Churchill, W. S.
Hannam, John


Clark, Hon A. (Plym'th S'n)
Hargreaves, Kenneth


Clark, Dr Michael (Rochford)
Harris, David


Clark, Sir W. (Croydon S)
Harvey, Robert


Clegg, Sir Walter
Haselhurst, Alan


Colvin, Michael
Havers, Rt Hon Sir Michael


Conway, Derek
Hawksley, Warren


Coombs, Simon
Hayhoe, Rt Hon Barney


Cope, John
Hayward, Robert


Cormack, Patrick
Heathcoat-Amory, David


Couchman, James
Heddle, John


Cranborne, Viscount
Henderson, Barry


Critchley, Julian
Hickmet, Richard


Crouch, David
Hicks, Robert


Currie, Mrs Edwina
Higgins, Rt Hon Terence L.


Dickens, Geoffrey
Hind, Kenneth





Hirst, Michael
Nicholls, Patrick


Hogg, Hon Douglas (Gr'th'm)
Normanton, Tom


Holland, Sir Philip (Gedling)
Norris, Steven


Holt, Richard
Oppenheim, Phillip


Hordern, Sir Peter
Oppenheim, Rt Hon Mrs S.


Howard, Michael
Osborn, Sir John


Howarth, Alan (Stratf'd-on-A)
Ottaway, Richard


Howarth, Gerald (Cannock)
Parkinson, Rt Hon Cecil


Howell, Rt Hon D. (G'ldford)
Patten, Christopher (Bath)


Howell, Ralph (Norfolk, N)
Patten, J. (Oxf W &amp; Abgdn)


Hubbard-Miles, Peter
Pattie, Geoffrey


Hunt, John (Ravensbourne)
Pawsey, James


Hunter, Andrew
Peacock, Mrs Elizabeth


Hurd, Rt Hon Douglas
Percival, Rt Hon Sir Ian


Irving, Charles
Pollock, Alexander


Jackson, Robert
Porter, Barry


Jessel, Toby
Powell, William (Corby)


Johnson Smith, Sir Geoffrey
Powley, John


Jones, Gwilym (Cardiff N)
Prentice, Rt Hon Reg


Jones, Robert (Herts W)
Price, Sir David


Joseph, Rt Hon Sir Keith
Prior, Rt Hon James


Key, Robert
Proctor, K. Harvey


King, Roger (B'ham N'field)
Raffan, Keith


Knight, Greg (Derby N)
Raison, Rt Hon Timothy


Knight, Dame Jill (Edgbaston)
Rathbone, Tim


Knox, David
Rees, Rt Hon Peter (Dover)


Lamont, Rt Hon Norman
Rhodes James, Robert


Lang, Ian
Rhys Williams, Sir Brandon


Latham, Michael
Ridley, Rt Hon Nicholas


Lawrence, Ivan
Ridsdale, Sir Julian


Lawson, Rt Hon Nigel
Rippon, Rt Hon Geoffrey


Lee, John (Pendle)
Robinson, Mark (N'port W)


Leigh, Edward (Gainsbor'gh)
Roe, Mrs Marion


Lennox-Boyd, Hon Mark
Rossi, Sir Hugh


Lester, Jim
Rost, Peter


Lewis, Sir Kenneth (Stamf'd)
Rowe, Andrew


Lightbown, David
Rumbold, Mrs Angela


Lilley, Peter
Ryder, Richard


Lloyd, Sir Ian (Havant)
Sackville, Hon Thomas


Lloyd, Peter (Fareham)
St. John-Stevas, Rt Hon N.


Lord, Michael
Sayeed, Jonathan


Luce, Rt Hon Richard
Shaw, Giles (Pudsey)


Lyell, Nicholas
Shaw, Sir Michael (Scarb')


McCrindle, Robert
Shelton, William (Streatham)


McCurley, Mrs Anna
Shepherd, Colin (Hereford)


Macfarlane, Neil
Shepherd, Richard (Aldridge)


MacGregor, Rt Hon John
Shersby, Michael


MacKay, Andrew (Berkshire)
Silvester, Fred


Maclean, David John
Sims, Roger


McLoughlin, Patrick
Skeet, Sir Trevor


McNair-Wilson, M. (N'bury)
Smith, Sir Dudley (Warwick)


McNair-Wilson, P. (New F'st)
Smith, Tim (Beaconsfield)


Madel, David
Soames, Hon Nicholas


Major, John
Speed, Keith


Malins, Humfrey
Spencer, Derek


Malone, Gerald
Squire, Robin


Maples, John
Stanbrook, Ivor


Marland, Paul
Stanley, Rt Hon John


Marlow, Antony
Steen, Anthony


Marshall, Michael (Arundel)
Stern, Michael


Maude, Hon Francis
Stevens, Lewis (Nuneaton)


Maxwell-Hyslop, Robin
Stewart, Andrew (Sherwood)


Mayhew, Sir Patrick
Stewart, Ian (Hertf'dshire N)


Mellor, David
Stradling Thomas, Sir John


Merchant, Piers
Taylor, John (Solihull)


Mills, Iain (Meriden)
Taylor, Teddy (S'end E)


Mitchell, David (Hants NW)
Temple-Morris, Peter


Moate, Roger
Terlezki, Stefan


Monro, Sir Hector
Thatcher, Rt Hon Mrs M.


Montgomery, Sir Fergus
Thomas, Rt Hon Peter


Moore, Rt Hon John
Thompson, Donald (Calder V)


Morris, M. (N'hampton S)
Thompson, Patrick (N'ich N)


Morrison, Hon C. (Devizes)
Thorne, Neil (Ilford S)


Moynihan, Hon C.
Thurnham, Peter


Mudd, David
Townsend, Cyril D. (B'heath)


Murphy, Christopher
Tracey, Richard


Neale, Gerrard
Twinn, Dr Ian


Needham, Richard
van Straubenzee, Sir W.


Nelson, Anthony
Vaughan, Sir Gerard


Neubert, Michael
Viggers, Peter






Waddington, David
Wiggin, Jerry


Waldegrave, Hon William
Wilkinson, John


Walden, George
Winterton, Nicholas


Walker, Rt Hon P. (W'cester)
Wolfson, Mark


Wall, Sir Patrick
Wood, Timothy


Waller, Gary
Woodcock, Michael


Walters, Dennis
Yeo, Tim


Ward, John
Young, Sir George (Acton)


Warren, Kenneth
Younger, Rt Hon George


Watson, John



Watts, John
Tellers for the Noes:


Wheeler, John
Mr. Robert Boscawen and


Whitfield, John
Mr. Tim Sainsbury.


Whitney, Raymond

Question accordingly negatived.

Question, That the proposed words be there added, put forthwith pursuant to Standing Order No. 33 (Questions on amendments) and agreed to.

Mr. Speaker: forthwith declared the main Question, as amended, to be agreed to.

Resolved,
That this House congratulates Her Majesty's Government on the success of its economic policies, which have brought inflation down to its lowest levels for two decades, combined with sustained economic growth, a million new jobs created since 1983, steadily rising living standards, and record levels of investment.

Mr. Hattersley: Earlier this evening my hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott) raised a point which affects the rights of hon. Members. I now raise it with you, Mr. Speaker, and, through you, the Leader of the House on a point of order.
When the Chancellor of the Exchequer made his autumn statement, he told the House that details of the statement would be available to hon. Members when he sat down. He did so at approximately 3·50 pm. Shortly after 5 pm — say, 70 minutes after he sat down — a printed document was found in a telephone booth. The document contained detailed information of the Chancellor's autumn statement and a detailed analysis of that statement. It could not have been produced and printed in one hour and 10 minutes.
When my hon. Friend raised the matter in the debate, the Chancellor, much to my hon. Friend's surprise and mine, rose to give an explanation. He said that the information had been prepared in advance of its being made available to hon. Members, and that it had been prepared by special advisers in the Treasury. I confess that it is not clear to me whether the special advisers were on the Conservative party payroll, who should not have seen the information, or whether they were on the public payroll and should not have been working for the Conservative party. However, what is clear, on the Chancellor's admission, is that before hon. Members received the information a digest was prepared for circulation to Conservative Members and for printing in Conservative Central Office. The Chancellor made that clear in your absence one hour ago, Mr. Speaker.
Clearly the matter affects the rights of every hon. Member. Many of us would regard it as abuse of the information which is at the Chancellor's disposal, not as a party politician but as a Minister. I do not expect the Leader of the House to make a statement on the subject tonight, for I have no doubt that, to protect the rights of hon. Members, he will choose to make inquiries into the

matter. I simply tell him that we believe that he will want to make a statement on the subject at 11 am tomorrow. I advise him to confirm that he proposes to do that.

Mr. Lawson: The right hon. Gentleman is barking up the wrong tree. When the hon. Member for Kingston upon Hull, East (Mr. Prescott) raised the matter, I replied immediately and gave an explanation. I said that I would double check. Since then I have double checked, and I can say that the story I told was correct. The document was prepared and copied in the Treasury by a special political adviser. The document was paid for by Central Office, which supplied the front cover. It was not released until well after I had sat down. That is a practice of long standing.

Mr. Hattersley: The Chancellor of the Exchequer seems to think that the answer that the document was paid for by Central Office covers everything. Hon. Members who are interested in rights and privileges will not believe that information being paid for by Central Office entitles Central Office to that information before hon. Members. I believe that the Leader of the House, whose honour in this matter I trust absolutely, should consider the position and report to the House on the propriety of it, according to our general custom, tomorrow morning.

Mr. Madden: Further to the point of order, Mr. Speaker. The matter is of considerable concern. Earlier this evening, the Chancellor of the Exchequer said that there was nothing unusual about the preparation of the document. It contains a great deal of additional information that was not contained in the statement made by the Chancellor at 3.30 pm. It is extremely important that we know the time when the document was circulated and to whom it was circulated. It is clear that the contents of the document could be used for personal gain by those who had advance knowledge of it and received it. It is not good enough for the Chancellor of the Exchequer to attempt to laugh off this matter. The contents of the statement were not available to Members until nearly 4 o'clock, and it is clear that this Conservative Central Office document was available long before that.

Mr. Dennis Skinner: rose—

Mr. Dick Douglas: rose—

Mr. Speaker: Order. I shall take further points of order, but I cannot see that there is anything in this matter for me.

Mr. Skinner: rose—

Mr. Speaker: Order. I remind the House that the Chancellor of the Exchequer resumed his seat at 3.48 pm. The House heard him say that the document, or a document, would be available at that time. I have no idea what this other document is, and it is not a matter for me.

Mr. Alan Williams: On a point of order, Mr. Speaker. If the document were in the public domain, why has Conservative Central Office marked it "Confidential"?

Mr. Skinner: On a further point of order, Mr. Speaker. The Chancellor of the Exchequer failed to mention to the House just when the document was made available to those in Conservative Central Office, the people who wanted to read it. You will know, Mr Speaker, that the last important document that was leaked resulted in the issue


having to be debated by various Select Committees, and it would be worth while seeing the same procedure take place on this occasion, especially as one in eight of Tory Members is a member of Lloyd's. Half of the Tory Back Benchers represent companies on the stock exchange. With the kind of information that was available in advance to them, they could have made a killing. They could have lined their pockets—[Laughter.] This is not a laughing matter. It is all right for the Chancellor of the Exchequer to try to laugh it off, but he is the man who is responsible for doubling the number of people who live in poverty in this country. At the same time he is lining the pockets of others—

Mr. Speaker: Order. That is a debating point.

Mr. Douglas: Further to that point of order, Mr. Speaker. It will be within your knowledge that, although the statement of the Chancellor of the Exchequer was not a Budget statement, there were significant tax elements in it, especially on petroleum revenue tax. Therefore —[Interruption.] The Chancellor of the Exchequer is interrupting from a sedentary position. We require a statement from him not mutterings from a sedentary position.
I ask you, Mr. Speaker, to study carefully the Hansard report, especially the reply which the Chancellor of the Exchequer gave to my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) when he asked a question about Scottish expenditure being lumped with other elements in the statement. He was told—I cannot quote verbatim, and I have not had the opportunity of checking this—by the Chancellor of the Exchequer that the Cabinet met this morning and that there was no time to apportion Scottish expenditure in a manner that would be apportioned when the autumn statement was fully prepared.
Time is of the essence, Mr. Speaker, and I ask you to try to prevail upon the Leader of the House to accept his

responsibilities for the House and to ensure that what the Chancellor of the Exchequer said — that this is not a precedent — is the truth. We have doubts about the authenticity of what the Chancellor is saying about this not being a precedent. Will the Chancellor quote other examples of political advisers in the Treasury behaving in a similar fashion?

Mr. Robert Key: Further to the point of order, Mr. Speaker. This is a matter of the utmost gravity. Conservative hon. Members have had made available to them today not one document but two on this matter. I understand that for some time the Labour party has been trying to persuade us that there are some 4 million people unemployed, rather than nearer 3 million. This document revealed that the Labour party was not prepared to believe that.
At approximately mid-day today, I was photocopying a letter to a constituent, and I read the rules about the photocopier—

Mr. Speaker: Order. This is very interesting, but it is not a point of order for me.

Mr. Key: We are dealing with a point of order, Mr. Speaker, on an abuse of this House. I understood that it was an abuse of the House to misuse photocopiers. I have a document here which was revealed to Conservative Members, published, apparently, by Labour Members and headed "Lawson Questions, 6 November 1986". It was a mass distribution to Labour Members of planted questions to the Government. Before they accuse us of receiving one document from an unauthorised source, they had better check their facts with their own Member about the other document.

Mr. Speaker: Order. The House knows that this has nothing to do with me as a point of order. These are debating points which should be raised at the proper time, on the Floor of the House, not at this time of night and not through me.

Visas (Fees)

Mr. Gerald Kaufman: On a point of order, Mr. Speaker. I draw your attention to a matter on which you have had occasion to comment in the past — the Government's making available information to the press before it is made available to Members of the House. Today, an Under-Secretary of State at the Foreign Office planted a question with his hon. Friend the Member for Berkshire, East (Mr. MacKay) about an increase in visa fees. The information shows that visa fees are to be increased by 66⅔ per cent. for some people and are to be doubled for others.
That information, Mr. Speaker, has been in the possession of the Government for some considerable time and could have been provided to the House in the debate on visas on Monday of last week. It was deliberately withheld by the Government, and now it has been given in a written answer. But that written answer was made available to the press at 3.30 pm. It was only because the press informed certain hon. Members about it that they know about it, and—this is the important point—would know about it before the House is prorogued and before the next Session commences next week.
This is a deliberate attempt — a piece of sharp practice — by the Government to smother this reprehensible information in a way that will prevent hon. Members from raising it in the House for a considerable time. I ask you, Mr. Speaker, to do what you have done in the past, with the appreciation of hon. Members on both sides of the House, and rule that it is not acceptable for the Government to provide information to the press before it is available to hon. Members so that they can raise it on behalf of their constituents.

Mr. Speaker: Order. I have no way of knowing whether this was made available in advance to the press. I accept what the hon. Gentleman has said. I know that question

No. 281 was on the Order Paper today. The answer was given to the hon. Member for Berkshire, East (Mr. MacKay) at 3.30 pm. I am sure that hon. Members have seen this answer, as I have just done, which states that the new fees will come into operation on 18 November. It seems to me that there is adequate time in which to debate this matter.

Mr. Kaufman: Further to the point of order, Mr. Speaker. That is the very point. The whole House has not seen the information. The hon. Member for Berkshire, East (Mr. MacKay) has seen the information. No other hon. Member had it available to him or her while members of the press had it available to them. Therefore, it was an abuse of the House of Commons to give information to the press when the House as a whole did not have it.

Mr. Speaker: I would certainly deprecate it if the information was given in advance to the press. The whole House knows that written answers are available at 3.30 pm in the Library.

Mr. Kaufman: indicated dissent.

Mr. Speaker: They are. It is a practice which has been going on for many years. I do not see that there is a point of order for me.

Mr. Robin Maxwell-Hyslop: Further to the point of order, Mr. Speaker. Since this alleged point of order has been raised so late in the evening, may I point out that what the right hon. Member for Manchester, Gorton (Mr. Kaufman), who raised the point of order, refers to as the "whole House" is an almost empty House on his side of the Chamber. In other words, his own hon. Friends are not interested in the matter.

AGRICULTURE

Ordered,
That Mr. David Maclean be discharged from the Agriculture Committee.—[Sir Reginald Eyre, on behalf of the Committee of Selection.]

PETITION

Hypothermia

Mr. Jeremy Corbyn: I present a petition from constituents of Islington, North and all other constituencies. It contains the names of some 13,000 petitioners. The signatures were collected by pensioners' organisations, health campaigns, tenants' associations and such groups which believe that deaths through hypothermia are an insult to a civilised society. They are concerned that in the forthcoming winter there will be further deaths from hypothermia in our so-called civilised society.
The petition calls for a substantial increase in old-age pensions. It states that pensioner households should not

be forced to pay standing charges for their gas and electricity and, above all, should have their supplies guaranteed so that they do not face the indignity of having their fuel supplies cut off, with a consequent danger to health and death from hypothermia.
The petitioners pray:
that the honourable House do urge the Secretary of State for Health and Social Services to put into law the Pensoners' Right to Heat, Light and Communications Bill to protect pensioners from fear of cold homes every winter.
The petition is signed by some 13,000 people, many of them elderly—many are over 80—who have written to me in support of their demands for urgent action by the House before prorogation to protect them in the forthcoming winter.

To lie upon the Table.

Conference on Security and Co-operation in Europe

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Malone.]

Mr. David Atkinson: Earlier this week the third follow-up meeting of the conference on security and co-operation in Europe — the so-called Helsinki process — opened in Vienna. It takes place against a very different background from its two predecessors.
The first review conference in Belgrade in 1977 and 1978 represented a great disappointment to those participating states which had hoped to see some progress in the two years following the euphoric signing of the Helsinki Final Act. It dashed the hopes of those in Communist Europe who were monitoring the implementation of the humanitarian provisions of the Act in the courageous but naive expectation that they would enjoy a degree of international protection for so doing.
It contributed to the growing realisation on the part of the free world that detente was proving to be a one-way street for the Soviet Union, which was seizing all the advantages of trade, credit and technology transfer while delivering nothing on the human rights issues spelled out in the Final Act. It was also, we now know, taking advantage of the spirit of detente to build up its own offensive capabilities, while we in the West were doing precisely the reverse.
The second review conference in Madrid in 1982 and 1983 took place against a background of the Soviet occupation of Afghanistan, the imposition of martial law in Poland, continued repression in eastern Europe, and, during the course of it, the shooting down by the Soviet Union of the South Korean airliner.
Despite such a deterioration in East-West relations, it was perhaps both surprising and encouraging that the concluding document at Madrid added to the original Helsinki commitments and provided for a series of subsidiary meetings on confidence-building measures, the peaceful settlement of disputes, human rights, and human contacts and scientific and cultural co-operation. By contrast, the Vienna conference this week begins with a far more encouraging background.
Last year in Helsinki at the tenth anniversary meeting of the signing of the Final Act all 35 Foreign Ministers recommitted themselves to full implementation of the Act. The confidence-building measures arrived at in Stockholm represent an encouraging step forward in verification through on-site inspection, which could well contribute to other arms control negotiations.
General Secretary Gorbachev is giving all the appearance of a new broom following the moribund Brezhnev, Andropov and Chernenko years. There is a more public Soviet perception of its immense economic problems which a significant reduction in defence expenditure and Western technological aid can help to reduce, although, as we all know, only a free economy will deliver the goods to the Russian people as it has to ours. We are in the middle of summitry. Geneva — followed by Reykjavik and Washington — hopefully in the new

year—may yet lead to meaningful reductions in arms before President Reagan retires to go down in history as one of his country's greatest Presidents.
All this augurs well for Vienna but only at first sight, because we must never allow ourselves to ignore the formidable realities and challenges that remain. There is, as yet, absolutely no evidence that the new leadership in the Kremlin is any different from that which so cruelly and effectively put an end to the Hungarian attempt at neutrality and political pluralism exactly 30 years ago, or indeed the Prague spring in 1968. Perhaps Vienna as a venue, just a few miles down the road from both Budapest and Prague, will remind all those participating there that these were the same roads taken by thousands of Hungarians and Czechoslovakians seeking refuge and freedom from Soviet domination. Nor is there any real evidence that the Soviet Union is to withdraw from Afghanistan, and I regret that the European Community is resuming those negotiations with Comecon which it broke off six years ago because of Afghanistan. What has changed?
The treatment of the Soviet Union's so-called dissidents has not improved. Police brutality, harsh treatment in labour camps, abuse of psychiatry—the case of Serajim Yevsyokov is particularly tragic— a wide variety of punishments and pressures, harassment and discrimination—in reality apartheid—remain the norm for anyone seeking true freedom of expression, assembly, unions or worship. Indeed, if anything, pressure on dissidents has intensified under Gorbachev. There is a practice— now commonplace — of re-sentencing dissidents while still serving sentences. That is surely contrary to natural justice. Conditions in penal establishments are deteriorating, and new laws against contact with foreigners and receiving gifts from abroad have been introduced contrary to the spirit of Helsinki.
As the whole world knows, one crude measure of repression is the number of Jewish refusniks denied exit visas and of the growing number of Christians who, like the Siberian Seven, are seeking to leave for countries where they may bring up their families in a religious manner free of state interference. It has been no different in every other eastern European Communist country.
In Poland, while we must but welcome the release of political prisoners, there is no relaxation of party control despite the clear support of the majority of its people for both Solidarity and the Church. In East Germany the number of political prisoners has reached 7,000 and the Federal Republic pays immense sums to purchase their freedom. In Czechoslovakia, in addition to the continual persecution of the Charter 77 campaigners, in recent weeks the authorities have called in some 300 young members of the so-called Jazz Section, an independent group which publishes books and music. In Bulgaria the entire Turkish population is being forcibly subjected to a total loss of their ethnic identity. In Rumania repression against religion continues unabated. Churches in Bucharest and elsewhere have been deliberately demolished to make way for housing blocks.
Last month I visited for the second time the Second Baptist Church in Oradea, in north-west Rumania, which holds 1,000 people, where Pastors Nichole Gheorghit a and Paul Negrut have built up a congregation of more than 2,500 people at every service, and where last year the authorities withdrew their original permission for them to rebuild a larger church to hold 2,200 people on a new site.


Now the old church is deteriorating and will collapse because of the way the drainage from the surrounding development has been laid.
I mention the Second Baptist Church in Oradea in particular because it was the present Romanian Deputy Foreign Minister, Mr. Iionne Totu—who is to visit London shortly for consultations—who was the official on the Central Council of the Romanian Communist party who was responsible for granting the original approval for the new larger church to be built, and which has since been withdrawn after his promotion. Perhaps my hon. Friend will ensure that this matter is raised with him when he comes to Britain.
Nor should we be fooled by the release recently of a number of well-known campaigners for human rights on whose behalf the free world has been campaigning, such as Shcharansky, Orlov and Father Calcui from Romania. While their release proves that perseverance on behalf of those whose names have thus become internationally known can succeed, if only to be exchanged for spies or as pawns in pre-summit propaganda, there are so many more who remain, like Sakharov, Father Gleb Yakunin and Lev Rengelson—of the Moscow Committee for the Defence of Religious Rights—like Valerie Sendarov and Ratislov Endikomov—the free trade union campaigners —and even Irana Ratsushinskaya, the Christian poetess, who though released this autumn is being denied a visa to obtain hospital treatment in Britain, and many thousands of prisoners of conscience whose names we do not know, as my right hon. and learned Friend said in Vienna on Tuesday.
Of course, we must hope that in time internal developments in all these countries will one day lead to the establishment of that pluralist democracy which we know offers the best guarantee of human rights and an end to the separation of Europe between freedom and slavery. In the meantime, it is the Helsinki process which offers the best and only peaceful way forward and it is in that realistic spirit which I know the Foreign Secretary and his colleagues will be negotiating at Vienna. They will, I hope, be .pursuing balanced progress in all areas of existing agreements of the Final Act before any new commitments can be entered into.
There are a number of positive steps which I hope will be considered at Vienna, which I want to put to the House on behalf of the three organisations with which I and several other hon. Members are associated: the International Society of Human Rights, the Inter-Parliamentary Group for Human Rights in the Soviet Union, and Christian Solidarity International.
First, Western participating states should ensure that a detailed report of all known previous violations of the conditions contained in principles VII and VIII as well as basket III should be presented. They should emphasise that the Final Act constitutes one entity. Those who violate the humanitarian conditions of basket III cannot expect to obtain advantages from the economic, scientific and technological co-operation suggested in basket II. Secondly, they should seek to construct a human rights commission and court of justice for the CSCE signatory states. In that way, the right of individual petition for citizens to voice complaints can be protected. Thirdly, they

should agree a charter for humanitarian aid which will guarantee every citizen the right to receive and provide such aid, which is currently denied in several states.
Fourthly, they should pass a declaration of the right of every citizen to supervise the observance of the Helsinki agreements and to form monitoring groups operating free of state interference. Fifthly, they should call for an experts conference concerning the question of movement and family reunification. Finally, they should call for an experts conference on ethnic minorities and a charter of rights for such minorities in CSCE participating states.
I think the whole House will agree that we who are fortunate enough to belong to one of the minority of nations in the world which enjoy true freedom and democracy have a moral obligation to raise our voices on behalf of those who do not. Standing up for human rights does not represent intervention in the internal affairs of other states. It is indeed provided for by the very principles of the Final Act without which real and lasting peace, security and co-operation are not possible. That is what I know my right hon. and learned Friend the Foreign Secretary and his colleagues are doing in Vienna at the present time, and the whole House will want to wish them every success.

The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs (Mr. Tim Eggar): The House will be grateful to my hon. Friend the Member for Bournemouth, East (Mr. Atkinson) for raising this matter and to you, Mr. Speaker, for selecting this subject for debate.
As my hon. Friend said, the third conference on security and co-operation in Europe follow-up meeting opened in Vienna on 4 November. This is therefore a timely opportunity to discuss the Government's approach to the CSCE process.
My right hon. and learned Friend the Foreign Secretary has just returned from Vienna, where he spoke on behalf of the 12 nations of the European Community. A copy of his speech has been placed in the Library.
My right hon. and learned Friend stated in his speech that in the CSCE process we aim to reduce tension and put an end to conflict, to release new forces for co-operation, and to respect both national and individual rights. He said:
The Twelve believe that the Final Act can be a force for good and a force for change in European and East-West relations. If all 35 countries who signed the Final Act implemented its principles the political atmosphere would be transformed, and not only in Europe. Mutual mistrust would give way to mutual confidence. Uncertainty and insecurity would give way to security. Anxiety would give way to optimism".
We are realists. We do not expect such ambitious results to be achieved overnight. Vienna is only one step in a long process of building confidence between East and West, but it is an important one which gives opportunities which must not be missed.
First and foremost, Vienna is an opportunity to take stock of the achievements of the Helsinki process and to review the implementation of the commitments entered into by 35 countries. Secondly, it is an opportunity to look for new ways of ensuring that those commitments are better carried out, and for new areas of East-West co-operation.
Superficially, there sometimes seems to be a tension between these various aspects. Reviewing implementation of commitments means exposing the failure of the Soviet Union and some Eastern European countries to treat their citizens humanely. The Soviet Union used to say that such exposure was unwarranted interference in internal affairs, which contradicted the search for new ways of co-operation.
In reality, of course, there is no contradiction, for greater East-West confidence, and better co-operation, can come about only against a background of frankness and truth in acknowledging where commitments are not being honoured. In the past few years, even the Soviet authorities have come to accept that human rights and humanitarian questions are a proper subject for international discussion.
Readiness to discuss is one thing; readiness to improve respect for human rights across the board is another. We are unfortunately still a long way away from that. The release by the Soviet Union of Anatoly Shcharansky, Yuri Orlov and others is very welcome, but it is not nearly enough.
We must not forget the continued existence of that unnecessary monstrosity, the Berlin wall, the enormous number of German, Jewish, Turkish and other ethnic would-be emigrants from Warsaw pact countries, the systematic wasteful jamming of western broadcasts to the east, the recent cri de coeur from individuals in Hungary, Czechoslovakia, the German Democratic Republic and Poland on the 30th anniversary of the Hungarian revolution and the continuing Soviet occupation of Afghanistan. Nor must we forget those many individuals of differing creeds in the Soviet Union who are persecuted merely for seeking freedom of religious expression. Those are things the whole House will want to recollect. That is the reality of life behind the iron curtain.
Those are issues which Ministers and officials raise regularly with the Soviet and East European authorities in the CSCE framework and bilaterally. Recently my right hon. and learned Friend the Foreign Secretary raised our concern over Soviet human rights abuses when he met the Soviet Foreign Minister, Mr. Shevardnadze, in Vienna. The Vienna meeting offers the opportunity patiently to press the Soviet Union and other East European countries to act more humanely. Change, when it comes, will largely be internally generated. However, we can help that process by reminding those countries of the standards to which they subscribed at Helsinki, by continuing to press for improvement and by showing that our concern is wholly compatible with the contacts and dialogue we want to encourage between East and West.
The meeting starts with fair omens. At the preparatory meeting, which settled the arrangements and agenda, we and our partners and allies obtained some modest improvements on previous meetings. There will be a rather longer period for reviewing implementation of existing commitments. Since that review is at the heart of the meeting, we welcome it. Rather more sessions will be open to journalists and others. That too is welcome. Another good omen is the recent successful conclusion of the CDE Stockholm agreement on confidence and security building measures.
The Vienna meeting will start with a review of implementation, or stocktaking, which will last into the new year. I have said enough to show that we attach priority to this part of the proceedings, and want to see a

full and thorough debate which does not gloss over the shortcomings of the Soviet Union and East European countries in human rights and contacts.
But the CSCE process ranges much more widely than human rights. It is a conference on security and cooperation in Europe. The Government's aim is to maintain a balance between all elements of the process. This means maintaining or restoring momentum in each of the three CSCE baskets. I will remind the House that basket I deals with basic principles, including human rights and security, basket II concentrates on economic co-operation, science and technology and the environment, and basket III concentrates on human contacts, information, culture and education.
We will aim at Vienna to reaffirm the West's longstanding view that these areas are linked, and that detente — for want of a better word — is indivisible and not susceptible to partial interpretation in terms of subject or geographical area. We will go on to stress that security cannot be divorced from the political, economic and human aspects of relations between states. Confidence and mutual trust cannot develop properly against a background of repression of human rights. When the conference goes on to consider new proposals for developing the CSCE process, our priorities will be in the areas where performance falls furthest behind commitments—military security, human rights and information.
Let me first deal with security. The Stockholm agreement is a major CSCE achievement. If implemented thoroughly — we will insist on that — it will be an important contribution towards greater openness about military activities in Europe. By establishing detailed provisions for on-site inspection, including on Soviet territory, the agreement breaks new ground. It shows that progress can be made in arms control negotations with the Soviet Union provided we are clear about our objectives.
The Stockholm agreement—the details of which will be familiar to the House — represents a significant achievement for the United Kingdom. Our delegation played a major role in the negotiation, particularly in the crucial discussions on verification. The excellent co-ordination with our partners and allies was an essential condition of success.
The task now is to build on this achievement. The Vienna meeting must help find ways to do this. We and our allies are currently considering the way forward in the NATO high level task force set up—at Franco-British initiative—by Foreign Ministers at Halifax in May. We intend that their final report in December will set the broad lines of the allied approach when discussion resumes at Vienna in the new year. There is clearly scope for further work on measures to increase confidence and stability. But we must also keep in mind our objective of working towards reductions leading to parity at lower levels of conventional forces in Europe. We hope, and will continue to insist, that the Stockholm agreement should now be matched by progress in the mutual and balanced force reductions talks at Vienna, where the major Western proposal—again initiated by Britain—of December last still requires a substantial response from the Warsaw pact.
In the vital "human dimension" of the CSCE process, Vienna must build on the discussions of those specialised meetings since Madrid which did not produce final documents. We will take the Western proposals tabled at the Ottawa human rights meeting, the Budapest cultural forum and the Berne experts meeting on human contacts


as our starting point in considering new texts on which we might agree. We also see value in the possibility of an experts meeting on information after Vienna. This is an important aspect of the Final Act which has been rather neglected since Madrid. I can think of no better venue for such a meeting than London, with its tradition of vigorous and free journalism and broadcasting.
The CSCE is about people, and their values, it is about individuals. We are regularly asked to raise individual cases in CSCE meetings. My hon. Friend has mentioned several examples of these—and five proposals—of which I have taken careful note. I will ensure that his comments are passed to the head of the United Kingdom CSCE delegation, Mr. Laurence O'Keeffe. I assure my hon. Friend that we share the concerns expressed and take parliamentary and public views into account when considering which matters to raise.
We do not always raise all the cases brought to our attention in plenary meetings. Sometimes we decide quite deliberately to raise such matters in private, bilateral sessions. There is, after all, a place for quiet, not megaphone, diplomacy.
For long-standing and well-understood reasons, we cannot commit ourselves to raising particular cases on specific occasions, but we recognise our obligation to the individuals concerned; and we will always be alive to opportunities to help them. We will ensure that the problems that their cases represent are fully and fairly addressed at Vienna.
The Government will maintain pressure at Vienna on the Soviet Union and East European countries to improve the lives of the people of Europe. This is an essential factor in maintaining public support for the CSCE process—a process which we believe lies at the very core of East-West relations.
Question put and agreed to.
Adjourned accordingly at two minutes to eleven o'clock.